Key Takeaways
- VYM is the largest dividend-focused ETF with over $84 billion in assets under management and a rock-bottom 0.06% expense ratio.
- The fund holds approximately 550-570 stocks, providing broader diversification than most dividend ETFs while maintaining a yield around 2.4-2.6%.
- VYM’s methodology selects companies with above-average dividend yields from the FTSE USA Index, excluding REITs, then weights holdings by market capitalization.
- Top holdings include Broadcom (8.7%), JPMorgan Chase (4.1%), and Exxon Mobil (2.4%), with financials representing the largest sector allocation at 21%.
- VYM has delivered a 10-year average annual return of approximately 12% and a 15-year average return of about 12%, demonstrating long-term consistency.
- The fund has increased dividends for over 10 consecutive years, making it a reliable choice for income-focused investors seeking broad market exposure.
Table of Contents
- What Is VYM?
- How VYM Selects Its Holdings
- VYM Holdings and Sector Allocation
- VYM Dividend History and Yield
- VYM Performance History
- VYM vs. Other Dividend ETFs
- Who Should Consider VYM?
- Frequently Asked Questions
The Vanguard High Dividend Yield ETF (VYM) stands as the largest dividend-focused exchange-traded fund in the United States, commanding over $84 billion in assets under management. Launched in November 2006, VYM has become a cornerstone holding for income-seeking investors who want broad exposure to dividend-paying companies without concentrating their portfolio in just a handful of stocks.
VYM’s combination of ultra-low costs (0.06% expense ratio), broad diversification (550+ holdings), and consistent dividend payments has made it one of the most popular ETFs for building passive income streams. In this comprehensive guide, we’ll examine everything investors need to know about VYM, including its methodology, holdings, dividend history, and how it compares to alternatives like SCHD.
What Is VYM?
The Vanguard High Dividend Yield ETF tracks the FTSE High Dividend Yield Index, which is designed to measure the investment return of common stocks of companies characterized by high dividend yields. Unlike dividend growth ETFs that focus on companies with long histories of increasing payouts, VYM targets companies that currently pay above-average dividends relative to the broader market.
VYM at a Glance
| Characteristic | Details |
|---|---|
| Ticker Symbol | VYM |
| Fund Manager | Vanguard |
| Inception Date | November 10, 2006 |
| Assets Under Management | $84+ billion |
| Expense Ratio | 0.06% |
| Number of Holdings | ~565-570 |
| Dividend Yield (TTM) | ~2.4-2.6% |
| Distribution Frequency | Quarterly |
| Index Tracked | FTSE High Dividend Yield Index |
VYM’s 0.06% expense ratio means investors pay just $6 annually for every $10,000 invested—among the lowest fees in the ETF industry. This cost efficiency compounds significantly over time, allowing more of the fund’s returns to flow through to shareholders.
How VYM Selects Its Holdings
Understanding VYM’s index methodology helps investors appreciate what they’re actually buying and how the fund differs from competitors. The FTSE High Dividend Yield Index follows a relatively straightforward selection process:
Step 1: Starting Universe
The index begins with all stocks in the FTSE USA Index, which represents the large and mid-cap segments of the U.S. equity market.
Step 2: REIT Exclusion
Real estate investment trusts (REITs) are removed from consideration. This exclusion has important tax implications—REIT dividends are typically taxed as ordinary income, while most VYM dividends qualify for the lower qualified dividend tax rate.
Step 3: Dividend Requirement
Companies must have paid a dividend within the past 12 months and be forecast to pay dividends over the next 12 months. Those that have cut dividends to zero are removed quarterly.
Step 4: Yield Ranking and Selection
Remaining stocks are ranked by their projected 12-month dividend yield. The index then selects stocks, starting with the highest yielders, until it captures approximately 50% of the dividend-paying universe’s market capitalization. This approach typically results in roughly 400-570 stocks, though the number increased beyond 550 in 2024-2025 due to concentration in the broader U.S. stock market.
Step 5: Market-Cap Weighting
Selected holdings are weighted by float-adjusted market capitalization, which naturally tilts the portfolio toward larger, more established companies with greater liquidity and stability.
Buffer Rules
To minimize unnecessary turnover, VYM uses buffer zones at its semi-annual reconstitution. Current holdings remain in the index until their yield falls below the 55th percentile of the selection universe. New stocks can only enter once their yield passes the 45th percentile. This approach has helped keep portfolio turnover at a modest 5-8% annually, enhancing tax efficiency.
VYM Holdings and Sector Allocation
As of early 2026, VYM holds approximately 565-570 stocks, making it one of the most diversified dividend ETFs available. This breadth helps reduce single-stock risk significantly compared to more concentrated alternatives.
Top 10 Holdings
| Rank | Company | Ticker | Weight |
|---|---|---|---|
| 1 | Broadcom Inc. | AVGO | 8.7% |
| 2 | JPMorgan Chase & Co. | JPM | 4.1% |
| 3 | Exxon Mobil Corporation | XOM | 2.4% |
| 4 | Johnson & Johnson | JNJ | 2.3% |
| 5 | Walmart Inc. | WMT | 2.3% |
| 6 | AbbVie Inc. | ABBV | 1.9% |
| 7 | Bank of America Corporation | BAC | 1.7% |
| 8 | The Home Depot, Inc. | HD | 1.7% |
| 9 | Procter & Gamble Company | PG | 1.6% |
| 10 | Cisco Systems, Inc. | CSCO | 1.4% |
The top 10 holdings represent approximately 27-28% of the portfolio, demonstrating reasonable concentration compared to the S&P 500 (where the top 10 often exceed 30-35% due to mega-cap tech dominance).
The Broadcom Factor
Broadcom’s position as VYM’s largest holding at 8.7% deserves special attention. The semiconductor company’s strong dividend yield combined with its massive market capitalization has made it a significant weight in the fund. This is particularly notable when comparing VYM to SCHD—Broadcom was removed from SCHD’s index in March 2024 after its price surge compressed its yield below the threshold required for inclusion. VYM, by contrast, continues to hold Broadcom because its yield, while lower than before, still qualifies under VYM’s less stringent methodology.
Sector Allocation
VYM’s sector allocation reflects where dividend-paying companies are concentrated in the market:
| Sector | VYM Weight | S&P 500 Weight |
|---|---|---|
| Financial Services | 21% | ~13% |
| Technology | 14-18% | ~32% |
| Healthcare | 13% | ~12% |
| Industrials | 13% | ~9% |
| Consumer Staples | 11% | ~6% |
| Energy | 8% | ~4% |
| Consumer Discretionary | 8% | ~10% |
| Utilities | 6% | ~2% |
| Communication Services | 4% | ~9% |
| Materials | 2% | ~2% |
VYM’s underweight to technology (14-18% vs. the S&P 500’s ~32%) is a defining characteristic. Many high-flying tech stocks pay minimal or no dividends, naturally excluding them from VYM’s universe. The fund’s overweight to financials, consumer staples, and energy reflects where dividend-paying stocks are concentrated.
VYM Dividend History and Yield
VYM pays dividends quarterly, typically in March, June, September, and December. The fund has established a strong track record of increasing annual dividend payments, with over 10 consecutive years of dividend growth.
Current Yield
As of early 2026, VYM’s trailing 12-month (TTM) yield sits around 2.4-2.6%, roughly double the S&P 500’s yield of approximately 1.2-1.4%. The 30-day SEC yield—a standardized measure that better reflects current portfolio characteristics—has recently been in a similar range.
Dividend Growth
VYM’s dividend payments have grown substantially over its history:
| Year | Annual Dividend | YoY Change |
|---|---|---|
| 2020 | $2.91 | – |
| 2021 | $3.10 | +6.5% |
| 2022 | $3.25 | +4.8% |
| 2023 | $3.48 | +7.1% |
| 2024 | $3.68 | +5.7% |
| 2025 | $3.79 | +3.0% |
VYM’s 5-year dividend compound annual growth rate (CAGR) has averaged approximately 3.8-4%, while the 10-year CAGR has been slightly higher. This growth rate is modest compared to dividend growth-focused ETFs like DGRO or VIG, but VYM compensates with a higher starting yield.
Tax Treatment
A significant advantage of VYM is that its dividends largely qualify for the qualified dividend tax rate, which is lower than ordinary income tax rates for most investors. The fund’s exclusion of REITs (whose dividends are typically taxed as ordinary income) enhances this tax efficiency. However, investors should note that holding VYM in a tax-advantaged account like an IRA or 401(k) may still be beneficial to avoid taxes on dividends entirely.
VYM Performance History
VYM has delivered solid long-term returns, though like all dividend-focused strategies, it has experienced periods of both outperformance and underperformance relative to the broader market.
Long-Term Returns
According to FinanceCharts, VYM has generated the following total returns (including reinvested dividends):
| Time Period | Total Return | Average Annual Return |
|---|---|---|
| 1 Year | ~17% | 17% |
| 3 Years | ~48% | 14% |
| 5 Years | ~81% | 12.8% |
| 10 Years | ~224% | 12.2% |
| 15 Years | ~451% | 12.1% |
| Since Inception (2006) | ~430% | ~9.1% |
Year-by-Year Performance
Looking at recent annual returns provides context for VYM’s behavior in different market environments:
| Year | VYM Total Return | S&P 500 Return | Difference |
|---|---|---|---|
| 2022 | -1% | -18% | +17% |
| 2023 | +9% | +26% | -17% |
| 2024 | +18% | +26% | -8% |
| 2025 | +15% | +24% | -9% |
The pattern is instructive: VYM significantly outperformed during 2022’s bear market (when tech stocks led the decline) but lagged during 2023-2025’s rally (when tech stocks led the recovery). This is characteristic of dividend and value-oriented strategies—they tend to provide downside protection during market stress but may trail during growth-dominated rallies.
Risk-Adjusted Performance
VYM typically exhibits lower volatility than the S&P 500, with a beta around 0.74-0.80. This means VYM’s price movements are about 20-25% less volatile than the broader market. The fund’s lower volatility has historically provided a smoother ride for investors, with smaller drawdowns during market corrections.
VYM vs. Other Dividend ETFs
Investors often compare VYM to other popular dividend ETFs. Understanding these differences helps match the right fund to your investment goals.
VYM vs. SCHD
The VYM vs. SCHD comparison is one of the most common debates among dividend investors:
| Characteristic | VYM | SCHD |
|---|---|---|
| Assets Under Management | $84B+ | $76B |
| Expense Ratio | 0.06% | 0.06% |
| Number of Holdings | ~565 | ~102 |
| Dividend Yield | ~2.5% | ~3.7% |
| Dividend History Required | 1 year | 10 years |
| Quality Screens | None | Cash flow, ROE, dividend growth |
| Portfolio Overlap | ~19% by weight | |
Despite both being dividend ETFs, VYM and SCHD have surprisingly low overlap (only about 19% by weight). SCHD is more concentrated and quality-focused, requiring 10 years of dividend history and applying quality screens. VYM is broader and simpler, focusing purely on current yield. SCHD offers higher yield (~3.7% vs. ~2.5%) but with more concentrated risk in just ~100 holdings.
In recent years, VYM has outperformed SCHD partly because VYM still holds Broadcom—a stock that was removed from SCHD’s index in 2024 when its price surge compressed its yield. This illustrates how different methodologies can lead to meaningfully different outcomes.
VYM vs. VIG
The Vanguard Dividend Appreciation ETF (VIG) offers a different approach—it focuses on dividend growth rather than current yield:
| Characteristic | VYM | VIG |
|---|---|---|
| Focus | High current yield | Dividend growth history |
| Dividend Yield | ~2.5% | ~1.6% |
| Expense Ratio | 0.06% | 0.05% |
| Holdings | ~565 | ~340 |
| Tech Allocation | ~14-18% | ~28% |
| Overlap | ~34% of VYM’s portfolio | |
VIG requires at least 10 consecutive years of dividend increases, resulting in a portfolio with higher quality characteristics but lower current yield. VIG’s higher tech allocation (due to holding companies like Microsoft and Apple that have strong dividend growth records) gives it more growth exposure. Some investors combine VYM and VIG to capture both high yield and dividend growth characteristics.
VYM vs. JEPI
For investors seeking even higher income, the JPMorgan Equity Premium Income ETF (JEPI) offers a covered-call strategy with yields around 7-8%:
| Characteristic | VYM | JEPI |
|---|---|---|
| Yield | ~2.5% | ~8% |
| Strategy | Passive index | Active covered calls |
| Expense Ratio | 0.06% | 0.35% |
| Distribution Frequency | Quarterly | Monthly |
| Capital Appreciation Potential | Full upside | Capped by options |
| Tax Efficiency | Qualified dividends | Mostly ordinary income |
JEPI’s higher yield comes at a cost—its covered-call strategy caps upside potential, and most distributions are taxed as ordinary income rather than qualified dividends. VYM is better suited for long-term total return, while JEPI may appeal to investors prioritizing current income over growth.
Who Should Consider VYM?
VYM may be appropriate for investors who:
- Want broad dividend exposure: With 550+ holdings, VYM provides diversified access to dividend-paying companies across most sectors.
- Prioritize low costs: The 0.06% expense ratio is among the lowest available, maximizing the portion of returns that flow to investors.
- Seek tax-efficient income: VYM’s exclusion of REITs means most dividends qualify for lower tax rates.
- Value simplicity: VYM’s straightforward methodology (high yields, market-cap weighted) is easy to understand and doesn’t require active management decisions.
- Have long time horizons: VYM’s value tilt may underperform during growth-led rallies but has historically provided competitive long-term returns with lower volatility.
- Want a single-fund dividend solution: VYM can serve as a core dividend holding without the concentration risk of owning just a few dividend stocks.
VYM May Not Be Ideal For:
- Maximum yield seekers: At ~2.5%, VYM’s yield is moderate. Investors seeking higher income might consider SCHD, high-yield bond funds, or covered-call strategies like JEPI.
- Growth-focused investors: VYM’s underweight to technology means it may lag during tech-driven market rallies.
- Dividend growth purists: VYM doesn’t require long dividend track records. Investors focused specifically on Dividend Aristocrats or Dividend Kings may prefer more selective funds.
Frequently Asked Questions
VYM has historically delivered solid long-term returns (approximately 12% annualized over the past 10-15 years) with lower volatility than the S&P 500. Its ultra-low expense ratio, broad diversification, and consistent dividend growth make it a reasonable core holding for income-focused portfolios. However, investors should understand that VYM’s value orientation means it may underperform during periods when growth stocks lead the market. Past performance does not guarantee future results.
VYM distributes dividends quarterly, typically in March, June, September, and December. The ex-dividend date usually falls in the middle of these months, with payments following shortly after. Investors must own shares before the ex-dividend date to receive that quarter’s payment.
VYM’s trailing 12-month yield has historically ranged between 2.4% and 3.2%, depending on market conditions. As of early 2026, the yield sits around 2.4-2.6%. The yield fluctuates based on share price movements and the dividends paid by underlying holdings. You can estimate your potential income using a dividend yield calculator.
Yes, the majority of VYM’s dividends qualify for the qualified dividend tax rate, which is lower than ordinary income tax rates for most investors. The fund’s exclusion of REITs (whose dividends are typically taxed as ordinary income) enhances this tax efficiency. However, a small portion of distributions may still be taxed at ordinary income rates, so investors should consult the fund’s year-end tax documentation.
VYM charges an expense ratio of just 0.06%, meaning investors pay $6 annually per $10,000 invested. This is among the lowest expense ratios in the ETF industry and identical to competitor SCHD. Low costs compound over time, allowing more of the fund’s returns to benefit shareholders.
No, VYM explicitly excludes real estate investment trusts (REITs) from its portfolio. This exclusion improves tax efficiency since REIT dividends are typically taxed as ordinary income rather than at the lower qualified dividend rate. Investors seeking REIT exposure would need to add it through a separate allocation.
For investors in the accumulation phase, reinvesting dividends through a DRIP (dividend reinvestment plan) can significantly enhance long-term returns through compounding. Those in retirement or needing current income may prefer to take dividends as cash. Most brokerages allow automatic dividend reinvestment at no cost.
VYM provides instant diversification across 550+ dividend-paying companies, reducing the risk of any single company cutting its dividend or experiencing a price decline. Building an equivalent portfolio of individual stocks would require significant capital and ongoing management. VYM’s 0.06% expense ratio is a minimal cost for this diversification and professional management.
This article is for educational purposes only and does not constitute investment advice. Investors should conduct their own research and consider consulting with a financial advisor before making investment decisions. Past performance does not guarantee future results.
