Vanguard High Dividend Yield ETF (VYM) could be the ideal vehicle to anchor investors’ portfolios to stable income-generating assets while market returns from capital appreciation remain anything but predictable and guaranteed.

The recently released estimate-crushing inflation data caused the market to relapse into yet another bout in a seemingly endless chain of market volatility. A white paper co-authored by former Fed Governor Frederic Mishkin released on the same day has all but dismissed the likelihood of a ‘soft-landing’ citing a lack of precedents in which a central-bank-induced disinflation occurred without a recession.

Amid this seemingly endless volatility, VYM, an exchange-traded fund managed by The Vanguard Group, Inc., offers exposure to dividend-paying large-cap companies that exhibit value characteristics within the U.S. equity market.

VYM has gained 2.5% over the past six months to close the last trading session at $106.82. The fund’s NAV was $106.79 as of March 1, 2023.

Size and Diversification

With around $49.49 billion in AUM, VYM is linked to FTSE High Dividend Yield Index, which has roughly 440 holdings with exposure tilted most heavily towards consumer, energy, and industrials.

VYM’s top holding is Exxon Mobil Corporation (XOM), which has a 3.31% weighting in the fund, followed by Johnson & Johnson (JNJ) at 2.98%, and JPMorgan Chase & Co. (JPM) at 2.82%. The top 10 of the fund’s 442 holdings constitute 23.5% of its AUM.

High Yield at Low Cost

VYM pays $3.25 annually as dividends which translates to a yield of 3.04% at the current price, higher than its category average of 1.22%.

VYM’s expense ratio of 0.06% also compares favorably to its category average of 0.47%.

Popularity with Consistency

VYM’s flows came in at $46.23 million over the past month and $1.8 billion over the past six months.

VYM primarily invests in the safest of businesses in stable industries. This gives the fund rock-solid stability, reflected in its beta of 0.91.

POWR Ratings Reflect Robustness

VYM has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

VYM has an A grade for Buy and Hold, consistent with the relatively safe margin between its current price and its 52-week high price of $115.53. Its recent price performance has earned it a grade B for Trade.

VYM is ranked #43 of 86 stocks in the Large Cap Value ETFs category.

Beyond what has been discussed above, additional ratings for VYM can be found here.

Bottom Line

VYM’s broad base of holdings in stable and profitable businesses, which have excellent track records of returning capital to shareholders, could help investors with a long-time horizon outlast the current bear market and capitalize on more optimistic times ahead.

How does Vanguard High Dividend Yield ETF (VYM) Stack up Against Its Peers?

VYM has an overall POWR Rating of B, which equates to a Buy. Investors could also consider looking at its peers in the Large Cap Value ETFs category, Schwab Strategic Trust – Schwab U.S. Dividend Equity ETF (SCHD), SPDR S&P Dividend ETF (SDY), and First Trust Rising Dividend Achievers ETF (RDVY), with an A (Strong Buy) rating.

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VYM shares were trading at $107.10 per share on Thursday afternoon, up $0.28 (+0.26%). Year-to-date, VYM has declined -1.03%, versus a 3.73% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...

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