Is Vanguard High Dividend Yield ETF (VYM) a Strong ETF Right Now?
Smart Beta ETF report for VYM
Designed to provide broad exposure to the Style Box - Large Cap Value category of the market, the Vanguard High Dividend Yield ETF (VYM) is a smart beta exchange traded fund launched on 11/10/2006.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $39.86 billion, this makes it one of the largest ETFs in the Style Box - Large Cap Value. VYM is managed by Vanguard. Before fees and expenses, this particular fund seeks to match the performance of the FTSE High Dividend Yield Index.
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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for VYM are 0.06%, which makes it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 2.71%.
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.
For VYM, it has heaviest allocation in the Financials sector --about 23.20% of the portfolio --while Consumer Staples and Healthcare round out the top three.
Taking into account individual holdings, Jpmorgan Chase & Co. (JPM) accounts for about 3.72% of the fund's total assets, followed by Johnson & Johnson (JNJ) and Home Depot Inc. (HD).
Performance and Risk
The ETF has added about 23.38% so far this year and is up roughly 38.58% in the last one year (as of 11/03/2021). In the past 52-week period, it has traded between $82.11 and $109.38.
VYM has a beta of 0.91 and standard deviation of 22.31% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 413 holdings, it effectively diversifies company-specific risk.
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 $57.32 billion in assets, Vanguard Value ETF has $87.92 billion. IWD has an expense ratio of 0.19% 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.
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.
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Vanguard High Dividend Yield ETF (VYM): ETF Research Reports
JPMorgan Chase & Co. (JPM): Free Stock Analysis Report
Johnson & Johnson (JNJ): Free Stock Analysis Report
The Home Depot, Inc. (HD): Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
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