Complicating your portfolio isn’t necessarily the best path to lasting wealth. If you’d rather take the steady-as-she-goes approach, then I invite you to consider the Vanguard High Dividend Yield Index Fund ETF Shares (NYSEARCA:VYM) as VYM stock should check all of the boxes for income-focused investors.
InvestorPlace contributor Todd Shriber actually put this exchange-traded fund (ETF) on his list of seven inexpensive, high-yield ETFs to buy. You’ll definitely want to browse through his list to see if any of those funds are appropriate for your account.
Shriber’s article alerted me to some of VYM’s features which really caught my eye. All in all, I think you’ll find that the fund manager, Vanguard, really knocked it out of the park with this particular ETF.
So, join me as we explore a simple and convenient fund that should appeal to yield hunters and growth-oriented investors of all stripes.
A Closer Look at VYM Stock
Before we explore the price history of VYM stock, please note one thing. The prices discussed below do not include dividend payments.
That’s an important point because, after all, the dividend yield is a primary selling point of this ETF.
Still, even without the dividend distributions factored in, the fund’s performance is fairly impressive. As evidence of this, we can observe the ETF’s 52-week price range of $60.07 to $101.12.
Moreover, on March 12, VYM stock settled at $101.10, very close to the 52-week high. In other words, the momentum is undeniably bullish.
To be honest, the fund’s performance isn’t extremely different from that of the S&P 500 Index.
But then, when we factor in the ETF’s dividend yield and some other considerations, we should be able to identify multiple advantages over an S&P 500-tracking fund.
Extremely Low Fees
I’m constantly pounding the table on behalf of low-fee funds for long-term investors.
That’s because over time, high fees can have a profound impact on an investor’s returns. Therefore, while low fees shouldn’t be the only consideration, they’re an important one.
In that regard, you can’t do much better than the Vanguard High Dividend Yield ETF. We’re talking about a fund with an expense ratio of just 0.06%.
If you look through Shriber’s list of inexpensive, high-dividend ETF’s, you’ll find that this Vanguard ETF has the lowest expense ratio of his picks.
Vanguard is famous for this, actually. Investors have been availing themselves of the fund sponsor’s rock-bottom fee structures for many years.
So, Vanguard gets an A+ when it comes to providing cost savings to shareholders. Yet, let’s not ignore the other aspects of the fund — namely, the dividend yield and the diversification of the holdings.
Heavy on the Financials
As the name of the fund implies, its main selling point should be its fabulous dividend yield. Right?
Concerning this, I would recommend moderating your expectations. As Shriber politely puts it, the Vanguard High Dividend Yield ETF’s dividend yield is “not alarmingly high.”
Currently, the fund’s annualized dividend yield is slightly more than 3%. Hence, this ETF isn’t likely to make you extremely wealthy overnight.
Nonetheless, that’s a respectable yield and Vanguard has been reliable in paying out its dividends.
Finally, we should turn our attention to the fund’s holdings. The key word here is “diversification,” and the Vanguard High Dividend Yield ETF excels in this respect.
Breaking the ETF’s holdings down by sector, we’ll find that 22.4% of the fund is in the financials sector. The next heaviest weightings are 13.2% for healthcare, 12.5% for consumer staples and 10% in industrials.
Thus, if you don’t mind allocating fairly heavily toward banking institutions — which isn’t necessarily a bad thing — then you should be okay with the fund’s diversified mix of holdings.
The Bottom Line
Probably the most outstanding feature of the Vanguard High Dividend Yield ETF would be the ultra-low fees.
However, the fund’s decent yield and somewhat financials-heavy holdings are also worth considering.
All in all, it’s an excellent income-producing ETF that you can park your money in without worrying about exorbitant fees undermining your returns.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.