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Vanguard High Dividend Yield ETF: 3.1% Yield With Quality Large-Cap Diversification

Published Wed, 23 Oct 2019 05:52:31 -0400 on Seeking Alpha

Vanguard High Dividend Yield ETF (NYSE: VYM) with $35 billion in total assets is one of the largest, dividend-focused, exchange-traded funds with an industry-leading low 0.06% expense ratio. The companies represented include most of the names that are traditionally recognized as "blue-chip" mega-cap industry leaders in a diversified portfolio of 406 U.S. stocks. A caveat worth mentioning is that VYM specifically excludes REITs and the current dividend yield of 3.14% is modest relative to other options in categories like "high-yield" but still well above the 1.8% yield for the S&P 500 (SPY). With that said, we think VYM does some things very well and may be a compelling choice as a core holding for income-focused investors looking for a broad market exposure. This article describes the composition of VYM along with the recent performance and our view on where VYM is headed next.

(Source: FinViz.com)
VYM is based on the FTSE High Dividend Yield Index which selects dividend-paying U.S. companies, excluding REITs, weighted by market cap. Financials with an 18.5% weighting, followed by Consumer Goods at 14.2% are the two most well-represented sectors. Notably, technology at 10.4% is underrepresented compared to the composition of the S&P 500 which currently has a 23.5% weighting in tech. The style tilt in VYM is large-cap-value, consistent with the companies that typically have higher-than-average dividend yields. (Source: Vanguard)
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