VYM Yields 2.3% and Costs 0.04% a Year. Here's What That Trade-Off Buys You.
The Vanguard High Dividend Yield ETF is one of the most popular in this space, but investors need to know what they're really buying.
Overview
The Vanguard High Dividend Yield ETF (NYSEMKT: VYM) currently yields 2.3%, more than double that of the S&P 500. On top of that, its 0.04% expense ratio makes the fund one of the cheapest ways to own a diversified high yield equity ETF for your portfolio.
While this fund doesn't necessarily use the most targeted stock selection process, it does represent one of the more conservative ways to invest in high dividend stocks. By including more than 600 qualifying stocks that have above-average forecasted yields, it virtually eliminates the negative impact any one stock might have on the fund.
What a lot of investors may not realize is that the Vanguard High Dividend Yield ETF has an unexpected dividend growth history despite not filtering for that specifically. Its long-term dividend growth rate is a modest 5%, but the fund has managed to increase its total annual dividend paid for each of the past 15 years.
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Originally published at www.fool.com.