Better Dividend ETF: Vanguard's VYM vs. iShares' HDV

The iShares Core High Dividend ETF (NYSEMKT:HDV) and Vanguard High Dividend Yield ETF (NYSEMKT:VYM) differ most on recent performance, yield, sector concentration, and portfolio breadth — VYM is broader and more tech-tilted, while HDV leans defensive and pays a higher yield.

Both HDV and VYM target U.S. companies known for paying above-average dividends, but the funds take different approaches to diversification and sector exposure. This comparison looks at costs, returns, risk, and the quirks that could matter most for dividend-focused investors choosing between them.

Snapshot (cost & size)

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.

VYM is slightly more affordable on fees, but HDV offers a higher dividend payout, which could appeal to those seeking income over cost minimization.

Performance & risk comparison

What's inside

VYM tracks a broad high-dividend index with 589 holdings as of its 19.1-year mark. Its sector exposure leans toward financial services (21%), technology (18%), and healthcare (13%), with large stakes in Broadcom (NASDAQ:AVGO), JPMorgan Chase & Co. (NYSE:JPM), and Exxon Mobil Corp. (NYSE:XOM). This broad approach captures a wide swath of the U.S. equity market, including some of the largest dividend payers, and may appeal to those seeking diversification.

HDV, by contrast, narrows its focus to 74 stocks and tilts more toward consumer defensive (28%), energy (24%), and healthcare (17%) companies. Its largest positions are in Exxon Mobil Corp. (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), and Chevron Corp. (NYSE:CVX), making it more concentrated in traditional defensive and energy sectors. Both funds are passively managed and do not introduce leverage or other structural quirks.

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What this means for investors

For investors seeking dividend-focused ETFs, both the iShares Core High Dividend (HDV) and the Vanguard High Dividend Yield (VYM) ETFs are viable contenders for different reasons.

HDV has a larger dividend yield than VYM, but its higher expense ratio cuts into some of that income. However, the ETF can be appealing to investors who want less risk and volatility. This is seen in its lower max drawdown and beta. The fund delivers this through its focus on stable, less volatile sectors, such as energy and healthcare.

VYM is appealing for other factors. Its much larger set of 589 holdings offers greater diversification, helping to protect from a downturn in a given sector. It also sports a far larger AUM of $84.5 billion, which provides greater liquidity compared to HDV. The lower expense ratio helps to offset the smaller dividend yield, and the ETF's exposure to the tech industry delivered a greater one-year return thanks to the rise of artificial intelligence.

VYM is the ETF to pick for investors who value diversification, lower costs, and stronger total returns over a dividend yield. HDV is for those who prioritize the highest dividend yield with the least volatility.

Glossary

ETF: Exchange-traded fund, a basket of securities that trades on an exchange like a stock.
Dividend yield: Annual dividends per share divided by the share price, showing income produced as a percentage.
Expense ratio: Annual fund operating costs expressed as a percentage of the fund’s average assets.
Beta: Measure of an investment’s volatility compared with the overall market, typically the S&P 500.
AUM: Assets under management; the total market value of all assets a fund manages.
Max drawdown: The largest peak-to-trough decline in an investment’s value over a specific period.
Total return: Investment performance including price changes plus all dividends and distributions, assuming reinvestment.
Defensive sector: Industries like consumer staples and utilities that typically hold up better during economic downturns.
Sector exposure: How a fund’s holdings are allocated across different industries or parts of the economy.
Portfolio breadth: The number and diversity of holdings within a fund’s portfolio.
Trading liquidity: How easily shares of a fund can be bought or sold without significantly affecting the price.
Passively managed: Fund strategy that tracks an index instead of trying to outperform it through active stock picking.

JPMorgan Chase is an advertising partner of Motley Fool Money. Robert Izquierdo has positions in Broadcom, JPMorgan Chase, and Johnson & Johnson. The Motley Fool has positions in and recommends Chevron, JPMorgan Chase, and Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom and Johnson & Johnson. The Motley Fool has a disclosure policy.