Welcome to MakemoneyFacts. In this blog post we’re taking a closer look a deep dive at the Vanguard dividend appreciation ETF (VIG) and the Vanguard High dividend yield ETF(VYM). We’re going to cover every single thing you need to know from a general overview of both ETFs to a closer look at each of the underlying indexes they cover. We’ll look at the expense ratios, a breakdown of the portfolio, their current dividend yield dividend growth rate.
Does it make sense to own your own portfolio. How much money in each of these ETFs would you need in your own portfolio in order to generate fifty thousand dollars a year in dividend income. And also look at how these dividend ETFs are taxed.
Vanguard dividend appreciation HTF and the Vanguard High dividend yield ETF (VYM). One thing you should note is that both of these ETFs are also available as mutual funds through the Admiral shares mutual fund whether you buy buy them as an ETF or as a mutual fund. There’s not a significant difference in the actual investment type. The biggest differentiator here is how they’re purchased and what price you purchase them.
For for the purposes of this review we’re going to look at the ETF version for both so on Vanguard’s website if we’re looking at VYM. It indicates that they seek to track the performance of the FTSE high dividend yield index which measures the investment return of Common Stocks of companies characterized by high dividend yields.
For VIG we see that they seek to track the performance
of the S&P U.S. Dividend Growers index. It’s a passively managed full replication approach so with VYM here when we’re talking about the FTSE high dividend yield index .They include stocks with the highest standard yields but they do not include REITs or real estate investment trusts. The high dividend yield index doesn’t appear to exist anymore for FTSE.
What appears to be the most relevant is the right here ftse all World High dividend yield index which is different.
Now, we do have information on this other index for vig which seeks to track the performance of the S&P U.S. dividend Growers Index. This information is available on the S&P Global website.
The S&P U.S dividend Growers index is designed to measure the performance of U.S companies that have followed a policy of consistently increasing dividends every year for at least 10 consecutive years. And importantly this index excludes the top 25 percent highest yielding eligible companies from the index.
The current market price for VIG is 156.63 as of January 2022 and for VYM that market price is 111.47. One of the greatest things about Vanguard is the fact that they have really low expense ratios. Each of these ETFs has an expense ratio of 0.06 percent.
Let’s just say you invested ten thousand dollars in each of these ETFs, the annual cost to own these indexes to have Vanguard manage this investment on your behalf is six dollars. This is significantly lower than most dividend ETFs on the market.
PortFolio Composition :
Let’s take a look at portfolio composition. First, here VYM. They high dividend yield gtf has 442 different dividend stocks in the portfolio. And if we look at the exposure to different sectors of the economy, we see that the biggest exposure is to financials at 19.9 percent. Then we have health care at 15.6 percent then we have Consumer Staples at 13.5 percent and then 10 & 13.50 for energy and Industrials.
Top 10 Holdings in VYM:
- Johnson & Johnson.
- Exxon Mobil Corp.
- JPMorgan Chase & Co.
- Procter & Gamble Co.
- Chevron Corp.
- Home Depot Inc.
- Eli Lilly & Co.
- Pfizer Inc.
- AbbVie Inc.
- Merck & Co. Inc.
All of them have a percentage higher than 1.5%, so you have an extreme amount of diversification with this ETF.
With Vig, we have a total of 289 dividend stocks. Not quite as many dividend stocks as we saw with VYM and you’ll notice here the breakdown with VIG is different. We have 22.9 percent in Information Technology much higher than we saw with VYM. Then we also have exposure to healthcare at 15.6 percent financials of 15.2 percent. Consumer Staples at 13.5. Energy here is only at 0.1 percent whereas it was 10 in the previous and Industrials at 13.5 percent.