Is Vanguard High Dividend Yield ETF (VYM) a Strong ETF Right Now?

This post was originally published on this site

The Vanguard High Dividend Yield ETF (VYM) made its debut on 11/10/2006, and is a smart beta exchange traded fund that provides broad exposure to the Style Box – Large Cap Value category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

If you’re the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is managed by Vanguard, and has been able to amass over $50.01 billion, which makes it one of the largest ETFs in the Style Box – Large Cap Value. This particular fund seeks to match the performance of the FTSE High Dividend Yield Index before fees and expenses.

The FTSE High Dividend Yield Index which is consists of common stocks of companies that pay dividends that generally are higher than average.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.

Annual operating expenses for this ETF are 0.06%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 3.02%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund’s holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 20.20% of the portfolio, the fund has heaviest allocation to the Financials sector; Healthcare and Consumer Staples round out the top three.

Taking into account individual holdings, Johnson & Johnson (JNJ) accounts for about 3.17% of the fund’s total assets, followed by Exxon Mobil Corp. (XOM) and Jpmorgan Chase & Co. (JPM).

Its top 10 holdings account for approximately 6.31% of VYM’s total assets under management.

Performance and Risk

So far this year, VYM has lost about -0.37%, and is down about -1.01% in the last one year (as of 01/20/2023). During this past 52-week period, the fund has traded between $94.88 and $114.57.

The ETF has a beta of 0.86 and standard deviation of 23.59% for the trailing three-year period, making it a medium risk choice in the space. With about 442 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard High Dividend Yield ETF is an excellent option for investors seeking to outperform the Style Box – Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $53.74 billion in assets, Vanguard Value ETF has $97.67 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box – Large Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Vanguard High Dividend Yield ETF (VYM): ETF Research Reports

JPMorgan Chase & Co. (JPM) : Free Stock Analysis Report

Johnson & Johnson (JNJ) : Free Stock Analysis Report

Exxon Mobil Corporation (XOM) : Free Stock Analysis Report

Vanguard Value ETF (VTV): ETF Research Reports

iShares Russell 1000 Value ETF (IWD): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research