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Vanguard High Dividend Yield Index Fund ETF Shares

VYM:NYSE

equity ETF | passive | Vanguard | Tracks FTSE

Market Price

US$148.41 (26 Jan 2026)

+11.82% (YoY)

NAV

US$147.68

+0.49% Premium

Yield

2.44%

0.00% (YoY)

Expense Ratio

6.00%

-87% vs Avg: 47.00%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF tracks the FTSE High Dividend Yield Index, offering exposure to U.S. companies with consistently higher-than-average dividend yields. It's a low-cost, diversified option for income-focused investors. Our bull case projects the NAV reaching US$170.67 (+15%) while the bear case suggests US$133.57 (-10%) over 12-18 months.

⚖️ Risk vs Reward

The underlying holdings of VYM currently trade at a P/E ratio of 20.69x, which is above the high dividend yield ETF category average of 11.29x, indicating a potential premium for dividend quality and stability. While the sector composition, with a significant tilt towards financials and healthcare, offers defensive characteristics, it may lag during aggressive growth-led market rallies. The 3-year beta of 0.74 suggests lower volatility than the broader market, balancing the risk-reward profile, yet concentration in top holdings presents a risk if specific sectors face headwinds.

🚀 Why VYM Could Soar

• Sustained corporate earnings growth among established U.S. companies could drive higher dividend payouts and capital appreciation, particularly in mature sectors like financials and healthcare.
• A flight to quality and income-generating assets in uncertain economic environments could increase demand for high-dividend stocks, supporting VYM's market price.
• Continued low interest rates, or further rate cuts, could enhance the attractiveness of dividend yields relative to fixed-income alternatives, bolstering investor interest.

⚠️ What Could Go Wrong

• Significant economic downturns could lead to dividend cuts or suspensions among underlying holdings, directly impacting the fund's income and capital returns.
• Rising interest rates might make fixed-income investments more appealing, diverting capital from dividend-paying equities and potentially causing valuation compression for VYM's holdings.
• Overconcentration in certain sectors, such as financials, exposes the fund to specific industry risks, which could lead to underperformance if these sectors face regulatory or economic headwinds.

🏢 Fund Overview

What Are You Actually Buying

The Vanguard High Dividend Yield ETF (VYM) invests in common stocks of U.S. companies distinguished by higher-than-average dividend yields, providing broad exposure to established income-generating businesses.
This market segment typically includes mature, financially stable companies across various sectors such as financials, healthcare, and consumer staples, emphasizing consistent shareholder returns over aggressive growth.
Investors seeking both current income and potential long-term capital appreciation from a diversified portfolio of dividend-paying U.S. equities often consider funds like VYM, which generally exhibit lower volatility compared to growth-oriented investments.

Market Dynamics & Outlook

The current market environment sees continued demand for income, especially as some investors seek alternatives to lower-yielding fixed-income options or stability amidst equity market fluctuations.
With a significant allocation to traditional value sectors, VYM's performance is sensitive to shifts in economic cycles, interest rate expectations, and the regulatory landscape affecting financial and utility companies.
While not positioned for aggressive growth rallies due to its lower technology exposure, VYM benefits from the enduring appeal of established companies with strong balance sheets capable of sustaining and growing dividends.

🎯 Why This Matters

Understanding VYM's focus on high-dividend U.S. equities is critical, as its performance profile differs from broader market indices. It offers a defensive tilt with consistent income but may experience less upside during periods of strong growth-stock outperformance. This makes it a strategic choice for specific portfolio roles, particularly for income generation and stability.

📈 Valuation & Analysis

Historical Performance

YTD

+2.91%

+15.43%

Yearly Growth (3Y)

+13.09%

Yearly Growth (5Y)

+12.68%

Yearly Growth (10Y)

+11.32%

Current Valuation

The Vanguard High Dividend Yield ETF (VYM) currently holds an aggregate price-to-earnings (P/E) ratio of 20.69x based on recent market data. Its price-to-book (P/B) ratio stands at 2.9x as of December 31, 2025. The fund's current dividend yield is 2.44%, which generally offers a premium compared to the broader U.S. equity market, aligning with its investment objective of high dividend yields. When compared to its category averages, VYM's P/E of 20.69x appears higher than the ETF Database category average P/E ratio of 11.29x for high dividend yield ETFs. However, it is consistent with its benchmark P/E of 20.3x as of December 31, 2025. This suggests that while the fund's holdings trade at a premium relative to some peers in the segment, this valuation is in line with its underlying index, reflecting the quality and stability of its dividend-paying constituents.

The Bull Case - Upside to

Robust Dividend Growth

Medium Probability

Consistent earnings growth among VYM's high-quality holdings could translate into increased dividend payouts, potentially boosting total returns by an additional 1-2% annually and attracting income-seeking investors.

Defensive Appeal in Volatile Markets

Medium Probability

Should market volatility increase or a broader economic slowdown emerge, VYM's focus on stable, dividend-paying companies could lead to relative outperformance, drawing capital flows and supporting a 5-10% premium to broader market indices.

Favorable Valuation Re-rating

Low Probability

If value stocks, particularly those with strong dividend profiles, experience a re-rating to higher P/E multiples relative to growth stocks, VYM could see its NAV appreciate by 8-12% beyond earnings growth, aligning its valuation closer to historical averages during value cycles.

The Bear Case - Downside to

Interest Rate Hikes Dampen Appeal

Medium Probability

Further significant increases in interest rates by the Federal Reserve could make bonds more attractive, reducing the relative appeal of dividend stocks and potentially causing a 5-8% contraction in VYM's valuation multiples.

Economic Recession and Dividend Cuts

Medium Probability

A severe economic recession might force many of VYM's underlying companies to cut or suspend dividends, directly reducing the fund's income stream and leading to a 10-15% decline in NAV due to investor sentiment and lower payouts.

Sector-Specific Headwinds

Low Probability

Given VYM's concentration in sectors like financials (21.89%), adverse regulatory changes, increased competition, or prolonged economic weakness within these sectors could disproportionately impact the fund's performance, leading to a 7-10% underperformance relative to diversified benchmarks.

Risk/Reward Assessment

The risk-reward profile for VYM reflects its dual nature as both an income-generating and capital appreciation vehicle. On the upside, sustained corporate earnings and a defensive market posture could drive solid, albeit moderate, gains. The fund's ability to provide consistent dividend income, coupled with its relatively low expense ratio, positions it favorably for long-term wealth accumulation, especially in environments where income is highly valued. However, the primary risks revolve around interest rate sensitivity and the potential for an economic downturn to impact dividend sustainability. While VYM's diversification across several hundred stocks mitigates idiosyncratic company risk, its sectoral tilt can expose it to broader industry-specific challenges. Investors must weigh the fund's lower volatility and income reliability against the potential for muted capital growth during aggressive bull markets and the specific vulnerabilities of its underlying sectors.

Peer Comparison

• VYM boasts an exceptionally low expense ratio of 0.06%, significantly lower than many peers and the category average, translating into greater long-term returns for investors. • Its broad diversification with over 560 holdings provides comprehensive exposure to U.S. high-dividend equities, mitigating single-stock risk more effectively than more concentrated dividend strategies. • VYM's consistent track record and substantial AUM of US$84.6 billion ensure high liquidity and tight bid-ask spreads, making it an efficient vehicle for large and small investors alike. • While its dividend yield may sometimes be lower than more aggressive income-focused ETFs, VYM emphasizes the sustainability and quality of dividends rather than maximizing yield, which can lead to more stable payouts over time.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
Vanguard High Dividend Yield ETF (VYM) ⭐	6.00%	US$84.6B	15.43%	13.09%	12.68%	2.44%
Schwab U.S. Dividend Equity ETF (SCHD)	6.00%	US$76.1B	17.00%	N/A	N/A	4.04%
Vanguard S&P 500 ETF (VOO)	3.00%	US$400.0B	20.00%	N/A	N/A	1.40%
Vanguard Value ETF (VTV)	4.00%	US$100.0B	14.50%	N/A	N/A	2.60%

🎯 Why This Matters

The valuation and peer analysis highlight VYM's role as a cost-effective, diversified vehicle for U.S. high-dividend exposure. Investors should consider its defensive characteristics and income focus in relation to their overall portfolio objectives, recognizing its potential for stability but also its sensitivity to interest rate environments and specific sector dynamics. Its competitive expense ratio and large asset base are significant advantages for long-term holders.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	AVGO	B	Broadcom Inc.	Technology	7.6%
2	JPM	J	JPMorgan Chase & Co.	Financials	4.2%
3	XOM	E	Exxon Mobil Corporation	Energy	2.4%
4	JNJ	J	Johnson & Johnson	Healthcare	2.4%
5	WMT	W	Walmart Inc.	Consumer Defensive	2.3%
6	ABBV	A	AbbVie Inc.	Healthcare	1.9%
7	BAC	B	Bank of America Corporation	Financials	1.7%
8	HD	T	The Home Depot, Inc.	Consumer Cyclical	1.6%
9	PG	T	The Procter & Gamble Company	Consumer Defensive	1.6%
10	CSCO	C	Cisco Systems, Inc.	Technology	1.4%

Fund Mechanics

How It Works

The Vanguard High Dividend Yield ETF (VYM) employs a passive investment strategy, aiming to replicate the performance of the FTSE High Dividend Yield Index. This index is constructed to identify and include common stocks of U.S. companies that consistently demonstrate higher-than-average dividend yields, while explicitly excluding Real Estate Investment Trusts (REITs). The fund's methodology involves a full-replication approach, meaning it invests substantially all of its assets directly in the securities that comprise the target index, in weights proportionate to their index representation. To manage portfolio integrity and transaction costs, the FTSE High Dividend Yield Index incorporates buffer rules during its semiannual rebalancing process. These rules help to reduce unnecessary portfolio turnover by allowing existing holdings to remain in the index even if their yield slightly dips, and new entrants are added only when their yield passes a higher threshold. This rules-based, transparent approach ensures that VYM remains true to its objective of providing efficient, broad exposure to the high-dividend segment of the U.S. equity market.

Holdings Breakdown

Number of Holdings

563

Top 10 Concentration

2709.0%

Turnover Rate

1130%

Category	Weight	Description
Financials	21.9%	Includes banks, insurance, capital markets, and asset management firms.
Technology	13.4%	Comprises semiconductor, software, and hardware companies.
Industrials	13.2%	Consists of industrial products and aerospace & defense companies.
Healthcare	12.9%	Includes drug manufacturers and healthcare plans.
Consumer Cyclical	9.8%	Primarily composed of retail - cyclical businesses.
Consumer Defensive	8.6%	Encompasses consumer packaged goods, beverages, and defensive retail.
Energy	8.3%	Comprises oil & gas and energy minerals companies.
Utilities	6.2%	Focused on regulated utility companies.
Communication Services	3.6%	Mainly telecommunication services providers.
Basic Materials	2.0%
Real Estate	0.0%

Cost Efficiency

Expense Ratio

6.00%

Median Bid-Ask Spread

1.000%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	15.43%	15.50%	-0.07%	N/A	N/A	N/A
2024	17.60%	17.65%	-0.05%	N/A	N/A	N/A
2023	6.53%	6.59%	-0.06%	N/A	N/A	N/A
2022	-0.42%	-0.32%	-0.10%	N/A	N/A	N/A
2021	26.14%	26.19%	-0.05%	N/A	N/A	N/A

Annualized Return Since Inception

8.96%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
VYM ⭐	Vanguard High Dividend Yield ETF	Vanguard	6.00%	US$84.6B	15.4%	13.1%	12.7%	2.44%	11.48%	0.70	1.000%
SCHD	Schwab U.S. Dividend Equity ETF	Charles Schwab	6.00%	US$76.1B	17.0%	N/A	N/A	4.04%	N/A	N/A	N/A
VOO	Vanguard S&P 500 ETF	Vanguard	3.00%	US$400.0B	20.0%	N/A	N/A	1.40%	N/A	N/A	N/A
VTV	Vanguard Value ETF	Vanguard	4.00%	US$100.0B	14.5%	N/A	N/A	2.60%	N/A	N/A	N/A
Category Average			47.00%	—	16.7%	13.1%	12.7%	2.55%	—	0.70	—

Risk Metrics

Beta

0.74

Alpha

0.00

R-Squared

64.10

Standard Deviation

1 Year	3 Years	5 Years	10 Years
N/A	11.48%	N/A	N/A

Sharpe Ratio

1Y	3Y	5Y	10Y
N/A	0.70	N/A	N/A

Sortino Ratio

3 Years	5 Years
N/A	N/A

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
N/A	N/A	N/A	-16.64%

Upside Capture

7100.0%

Downside Capture

9400.0%

Correlations

Liquidity & Trading

Volume

Avg Daily Shares

1,686,998

Avg Daily Dollar Volume

US$250.6M

Trend

increasing

Bid-Ask Spread

Metric	Value
Median (Percent)	1.000%
Median (Dollar)	US$0.01
During Hours	N/A
At Close	N/A
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	73.00%
30-Day Average	0.00%
1-Year Average	0.00%
Standard Deviation	N/A
Max Premium (1Y)	2.00%
Max Discount (1Y)	-2.00%

Creation/Redemption Activity

Trend

stable

Net Flows

Period	Net Flow

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.