VYM ETF: Vanguard High Dividend Yield Fund Analysis

What Is VYM?

The Vanguard High Dividend Yield ETF (NYSE: VYM) is one of the largest dividend-focused ETFs in the world, with over $55 billion in assets under management. Launched in November 2006 by Vanguard, it offers investors a low-cost way to access a broad basket of U.S. dividend-paying stocks in a single holding.

VYM tracks the FTSE High Dividend Yield Index, which takes a notably different approach than many competing dividend ETFs. Rather than screening for quality factors or dividend growth, VYM casts a wide net — selecting the higher-yielding half of the U.S. dividend-paying universe and weighting positions by market capitalization. The result is a diversified, market-like portfolio with an income tilt. For context on how dividend ETFs work, see our guide to dividend ETFs.

Index Methodology: Simplicity as a Feature

VYM's methodology is deliberately straightforward:

• Step 1: Start with all U.S. stocks that pay dividends and meet minimum liquidity and market cap thresholds.
• Step 2: Rank them by forecasted 12-month dividend yield.
• Step 3: Select the top 50% by yield (excluding REITs).
• Step 4: Weight the selected stocks by market capitalization.

This approach means VYM does not apply quality filters, profitability screens, or dividend growth requirements. The upside is that you get an enormous, diversified portfolio of 450+ stocks that is unlikely to be significantly different from the broad market's value segment. The downside is that VYM may include companies with deteriorating fundamentals, as long as their yield is above the median. The index reconstitutes annually, and the fund rebalances quarterly.

Top Holdings and Sector Allocation

Because VYM is market-cap weighted, its top holdings are some of the largest dividend-paying companies in America:

• Broadcom (AVGO) — Semiconductor giant with a rapidly growing dividend
• JPMorgan Chase (JPM) — The largest U.S. bank by assets
• ExxonMobil (XOM) — Energy major with a 42-year dividend increase streak
• Johnson & Johnson (JNJ) — Healthcare Dividend King profiled in our JNJ spotlight
• Procter & Gamble (PG) — Consumer staples leader with 68 years of increases
• Home Depot (HD) — Leading home improvement retailer

Sector allocations are heavily tilted toward traditional value and income sectors:

• Financials: ~20-22% — Banks, insurance, and asset managers
• Healthcare: ~13-15% — Pharma, biotech, and medical devices
• Consumer Staples: ~12-14% — Food, beverage, and household products
• Industrials: ~11-13% — Manufacturers, defense, and logistics
• Energy: ~10-12% — Integrated oil and gas companies
• Technology: ~9-11% — Mature tech companies with dividends
• Utilities: ~6-8% — Regulated electric and gas utilities

VYM vs. SCHD: The Key Differences

VYM and SCHD are the two most popular dividend ETFs, and investors frequently debate which is better. The core trade-offs are:

• Diversification: VYM holds 450+ stocks versus SCHD's ~100. VYM provides broader exposure and less concentration risk.
• Quality screening: SCHD applies rigorous quality filters (ROE, FCF-to-debt, dividend growth). VYM does not — it simply takes the higher-yielding half of dividend payers.
• Dividend growth: SCHD has historically grown its dividend at 10-12% CAGR versus VYM's 5-7%. The quality filter makes the difference.
• Total return: SCHD has outperformed VYM over most multi-year periods since 2011, though VYM has had years of outperformance during broad value rallies.
• Yield: The two have comparable current yields, typically within 0.3% of each other.
• Expense ratio: Both charge 0.06% — a tie.

Neither is objectively "better." VYM suits investors who want maximum diversification and a market-like experience with an income tilt. SCHD suits investors who want a concentrated quality portfolio with faster dividend growth. Many investors own both. For a head-to-head comparison with interactive data, visit our SCHD vs. VYM comparison page.

Performance and Yield History

VYM's long track record (since November 2006) provides nearly two decades of performance data:

• 10-Year Annualized Total Return: Approximately 9-10%
• Since Inception Annualized Return: Approximately 8.5-9.5%
• Dividend Growth (10-Year CAGR): Roughly 6-7%
• Current Yield: Approximately 2.8-3.2%

VYM held up well during the 2008-2009 financial crisis relative to high-yield strategies that included financials with unsustainable payouts. The fund's broad diversification has historically reduced drawdowns compared to concentrated dividend strategies, making it a smoother ride for risk-averse investors. For more on understanding dividend fundamentals, see our dividend basics guide.

Frequently Asked Questions