Which is the Best Vanguard ETF for Dividends?
Key Points
The Vanguard High Dividend Yield ETF offers a higher dividend yield and shallower five-year drawdowns than the Vanguard Dividend Appreciation ETF.
Vanguard Dividend Appreciation ETF skews more heavily toward technology and growth-oriented dividend payers
Both funds charge identical ultra-low fees and are managed by Vanguard
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Vanguard High Dividend Yield ETF (NYSEMKT:VYM) and Vanguard Dividend Appreciation ETF (NYSEMKT:VIG) both provide low-cost exposure to U.S. dividend stocks, but VYM emphasizes higher yields while VIG focuses on companies with a history of growing dividends and a pronounced tilt toward technology.
Both VYM and VIG are designed for investors seeking dividend-focused equity exposure, tracking slightly different index strategies under Vanguard's management. This comparison highlights their fees, yields, sector allocations, performance, and risk to help evaluate which may better suit a given dividend approach.
Snapshot (cost & size)
| Metric | VYM | VIG |
|---|---|---|
| Issuer | Vanguard | Vanguard |
| Expense ratio | 0.04% | 0.04% |
| 1-yr return (as of 2026-02-04) | 15.6% | 12.0% |
| Dividend yield | 2.3% | 1.6% |
| Beta | 0.76 | 0.84 |
| AUM | $84.6 billion | $120.1 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.
Both funds charge an ultra-low 0.04% expense ratio, but VYM stands out for its higher 2.3% dividend yield compared to VIG's 1.6%. Investors prioritizing income may prefer VYM, while those seeking dividend growth could lean toward VIG.
Performance & risk comparison
| Metric | VYM | VIG |
|---|---|---|
| Max drawdown (5 y) | (15.83%) | (20.39%) |
| Growth of $1,000 over 5 years | $1,616 | $1,597 |
What's inside
VIG tracks a portfolio of 338 large-cap U.S. stocks with a consistent record of raising dividends, featuring a pronounced tilt toward technology (27%), followed by financial services and healthcare. The top holdings include Broadcom Inc (NASDAQ:AVGO), Microsoft Corp (NASDAQ:MSFT), and Apple Inc (NASDAQ:AAPL). With nearly 20 years of track record and $120.1 billion in assets under management (AUM), the fund appeals to investors seeking stability and dividend growth.
In contrast, VYM casts a wider net with 563 holdings, leaning into financial services, technology, and healthcare, but with less concentration in tech than VIG. Its largest positions are Broadcom Inc (NASDAQ:AVGO), JPMorgan Chase & Co (NYSE:JPM), and Exxon Mobil Corp (NYSE:XOM), reflecting its focus on higher-yielding stocks rather than just dividend growers.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
To many investors, Vanguard ETFs are among the best in the business. Vanguard is the second-largest ETF manager and the fastest-growing in recent years, pulling in huge net inflows.
These are two of Vanguard’s best dividend ETFs and investors really cannot go wrong with either. But I would give the slight edge to VYM, mainly due to its higher dividend yield.
VIG tracks the performance of the S&P U.S. Dividend Growers Index, which invests in large-cap stocks with a history of increasing their dividends each year. While it is more tech-heavy and has slightly higher long-term returns, VIG excludes the roughly 25% of dividend stocks with the highest yields, as high-yielding dividend stocks are seen as slower growers. So, this results in a higher yield.
The VYM ETF tracks the performance of the FTSE High Dividend Yield Index, which includes stocks that are anticipated to generate high dividend yields. It has an average yield of 2.3%, which is significantly higher than the VIG.
It also measures up well from a return perspective. Over the past 12 months, the ETF has returned a robust 20.5% with dividends reinvested, compared to 15.5% for the VIG. It also has a better average annualized five-year return of 13.6% compared to 12% for the VIG. However, the VIG does beat it with a 14.2% 10-year annualized return versus 12.8% for the VYM ETF.
With expense ratios exactly the same, the Vanguard High Dividend Yield ETF stands out as the better Vanguard dividend ETF.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, JPMorgan Chase, Microsoft, Vanguard Dividend Appreciation ETF, and Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
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