Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the Vanguard High Dividend Yield ETF (
VYM Quick Quote VYM - Free Report) is a passively managed exchange traded fund launched on 11/10/2006.
The fund is sponsored by Vanguard. It has amassed assets over $39.50 billion, making it one of the largest ETFs attempting to match the Large Cap Value segment of the US equity market.
Why Large Cap Value
Companies that fall in the large cap category tend to have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.
Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
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 2.74%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector--about 23.30% of the portfolio. Consumer Staples and Healthcare round out the top three.
Looking at individual holdings, Jpmorgan Chase & Co. (
JPM Quick Quote JPM - Free Report) accounts for about 3.72% of total assets, followed by Johnson & Johnson ( JNJ Quick Quote JNJ - Free Report) and Home Depot Inc. ( HD Quick Quote HD - Free Report) . Performance and Risk
VYM 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.
The ETF has gained about 22.29% so far this year and was up about 34.77% in the last one year (as of 10/22/2021). In the past 52-week period, it has traded between $78.88 and $108.77.
The ETF has a beta of 0.91 and standard deviation of 22.35% for the trailing three-year period, making it a medium risk choice in the space. With about 413 holdings, it effectively diversifies company-specific risk.
Vanguard High Dividend Yield ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VYM is an excellent option for investors seeking exposure to the Style Box - Large Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 1000 Value ETF (
IWD Quick Quote IWD - Free Report) and the Vanguard Value ETF ( VTV Quick Quote VTV - Free Report) track a similar index. While iShares Russell 1000 Value ETF has $56.44 billion in assets, Vanguard Value ETF has $87.19 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%. Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
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.