Launched on 11/10/2006, the Vanguard High Dividend Yield ETF (
VYM Quick Quote VYM - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Value segment of the US equity market.
The fund is sponsored by Vanguard. It has amassed assets over $42.34 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. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.
Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value 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 3.14%.
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.
This ETF has heaviest allocation to the Financials sector--about 20% of the portfolio. Healthcare and Consumer Staples round out the top three.
Looking at individual holdings, Johnson & Johnson (
JNJ Quick Quote JNJ - Free Report) accounts for about 3.23% of total assets, followed by Jpmorgan Chase & Co. ( JPM Quick Quote JPM - 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 lost about -8.37% so far this year and it's up approximately 0.12% in the last one year (as of 07/01/2022). In the past 52-week period, it has traded between $99.20 and $115.01.
The ETF has a beta of 0.86 and standard deviation of 22.76% for the trailing three-year period, making it a medium risk choice in the space. With about 410 holdings, it effectively diversifies company-specific risk.
Vanguard High Dividend Yield ETF holds a Zacks ETF Rank of 1 (Strong 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 $50.87 billion in assets, Vanguard Value ETF has $93.54 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%. Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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.