The ETF “seems to weed out companies with high leverage and poor cash flow,” according to Morningstar analyst Samuel Lee. “The result is quality rather than high yield, so income-hungry investors might be surprised by a dividend yield that just matches the market. Whereas many dividend-focused funds concentrate in smaller value companies, this fund shades slightly toward growth.”
Nevertheless, Vanguard also offers a high-yield ETF, the Vanguard High Dividend Yield Index ETF (NYSEArca: VYM), which recently had its expense ratio lowered to 0.10% from 0.13%. The fund only tracks U.S. dividend payers, excluding real estate investment trusts, excludes companies that did not pay a dividend in the past year and ranks holdings by yield. VYM has a 3.05% 12-month yield. [Dividend ETF Fee Cut: Popular Vanguard ETF Gets Even Cheaper]
For more information on dividends, visit our dividend ETFs category.
Max Chen contributed to this article.