Smart Beta Strategy: A Classic Among Dividend ETFs

VYM holds nearly 430 stocks and is diverse at the sector level as five groups – consumer goods, technology, financial services, healthcare and industrials – receive double-digit weights. Although it is a highd dividend ETF, high-yielding sectors such as telcom and utilities combine for less than 13% of VYM’s weight. Earlier this year, Vanguard lowered the annual fee on VYM by one basis point.

VYM tracks the FTSE High Dividend Yield Index and excludes real estate stocks. The ETF charges just 0.08% per year, or $8 on a $10,000 investment, making it less expensive than 92% of competing funds, according to issuer data.

“The really risky names are still a relatively small part of the portfolio. So, that’s a strategy that is very well constructed. We give it a Morningstar Analyst Rating of Silver, and it charges a very low 8 basis points expense ratio. So, it’s one of the lowest-cost dividend strategies on the market. So, that’s one that we really like,” according to Morningstar.

VYM’s dividend yield is 2.95%, or more than 100 basis points higher than what is found on the S&P 500. Up nearly 5% year-to-date, VYM resides about 0.6% below record highs.

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