VYM: This U.S. Dividend ETF Could Outperform Tech for 10 Years

It often seems like all the action in the stock market is focused on tech stocks: the artificial intelligence (AI) boom, semiconductor stocks, memory stocks. The tech-heavy Nasdaq-100 index has delivered about 19% year to date, 40% in the past year, and 119% in the past five years. What could compete with that?

The answer might surprise you. According to recent Vanguard research, some of the best stock market returns in the next few years might come from other parts of the market, away from tech-heavy growth stocks. The Vanguard 2026 economic and market outlook forecasts that U.S. value-oriented stocks will offer a better risk-return profile for the next five to 10 years than U.S. growth (tech) stocks.

One exchange-traded fund (ETF) that could deliver on that goal is the Vanguard High Dividend Yield ETF (NYSEMKT: VYM). This fund holds only U.S. large value stocks and has outperformed the S&P 500 index year to date.

Let's look at the details of this Vanguard ETF and see if it could be a good choice for your portfolio.

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Vanguard High Dividend Yield ETF: 608 steady dividend payers, 0.04% expense ratio

The Vanguard High Dividend Yield ETF consists of 608 U.S. stocks that tend to pay higher-than-average dividends. These are mostly not tech stocks or AI stocks. Instead, the fund focuses on large value stocks. Its top 10 holdings are mainly pharmaceutical companies, energy companies, and financial institutions.

This fund also lets you own popular blue chip stocks like JPMorgan Chase (3.34% of the fund), Johnson & Johnson (2.3%), Procter & Gamble (1.44%), and Coca-Cola (1.28%).

The ETF has delivered average annual returns (by net asset value) of 10.2% year to date, 29.5% in the past year, and 17% for the past three years. And it's an ultra-low-cost index fund -- the expense ratio is only 0.04%.

What about the dividends? The Vanguard High Dividend Yield ETF is accurately named: Its dividend yield is 2.24%, which is part of the reason why this ETF made The Motley Fool's list of best dividend index funds.

One possible risk with this fund's portfolio is that its top holding, Broadcom, makes up 8% of the fund's assets (as of April 30). This doesn't have to be a deal-breaker. But before buying this fund, investors should know that it has become slightly top-heavy with that one tech stock.

Why buy the Vanguard High Dividend Yield ETF?

Dividend stocks and value stocks aren't always as glamorous and high-flying as tech stocks. But the companies represented in the Vanguard High Dividend Yield ETF tend to be high-quality, with strong balance sheets, durable competitive advantages in their markets, and the financial strength to keep paying high dividends year after year.

There's no guarantee that Vanguard's research forecast will prove correct -- tech stocks might keep beating value stocks and the rest of the market for years to come. But if you are leery of the high valuations of tech stocks or worried about a possible AI bubble, diversifying into value-oriented stocks could be a good move. If you want to own a broad mix of reliably profitable, steady dividend-paying companies, the Vanguard High Dividend Yield ETF could be worth a look.

JPMorgan Chase is an advertising partner of Motley Fool Money. Ben Gran has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom, JPMorgan Chase, and Vanguard High Dividend Yield ETF. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.