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?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
VYM is managed by Vanguard, and this fund has amassed over $42.19 billion, which makes it one of the largest ETFs in the Style Box - Large Cap Value. Before fees and expenses, VYM 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
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.
Operating expenses on an annual basis are 0.06% for this ETF, which makes it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 2.72%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 21.70% of the portfolio, the fund has heaviest allocation to the Financials sector; Healthcare and Consumer Staples round out the top three.
Looking at individual holdings, Jpmorgan Chase & Co. (JPM) accounts for about 3.72% of total assets, followed by Johnson & Johnson (JNJ) and Home Depot Inc. (HD).
Performance and Risk
The ETF return is roughly 1.23% and was up about 29.55% so far this year and in the past one year (as of 01/05/2022), respectively. VYM has traded between $90.99 and $114.02 during this last 52-week period.
VYM has a beta of 0.91 and standard deviation of 21.93% 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 $60.72 billion in assets, Vanguard Value ETF has $93.67 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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