The Vanguard High Dividend Yield ETF (NYSEArca: VYM) is the fourth largest dividend stock ETF, with $9.6 billion in assets under management. The fund includes stocks that are expected to pay a dividend over the next 12 months and ranked by their forecast dividend yield. VYM has a 2.83% 12-month yield.
However, fees would eat away at the yield return. For instance, the average mutual fund charges investors 1.2% in fees, whereas the average stock dividend yield is about 1.9%. Consequently, Bogle points out that investors are only left with just 0.7% in net yield to reinvest. In contrast, VIG and VYM both have a 0.10% expense ratio, and non-leveraged stock ETFs have an average expense ratio of 0.54%, according to XTF data. [Build a Dirt-Cheap Portfolio With These ETFs]
“We eat up all of our dividends with stock expenses,” Bogle said at the Bogleheads’ annual meeting last week. And the “industry you could easily say doesn’t give a damn.”
Some may argue that their managers beat the market, which would justify the higher fees. However, over the long term, active managers typically underperform the market. According to the S&P Dow Jones’ SPIVA research, the majority of active managers underperform their benchmarks in the long run. [Indexology: Ouch. That’s gonna leave a mark]
For more information on dividend stocks, visit our dividend ETFs category.
Max Chen contributed to this article.