Is the Vanguard High Dividend Yield ETF a Buy Now?
Key Points
Overweights to energy, tech, and industrials helped the Vanguard High Dividend Yield ETF (VYM) outperform this year.
There's a lot of value built into this portfolio. That could help later this year if the economic data keeps trending lower.
Strong forecasted corporate earnings growth should be the rising tide that lifts all boats.
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The Vanguard High Dividend Yield ETF (NYSEMKT: VYM) has very quietly been a strong performer in 2026. Its double-digit weightings in energy, tech, and industrials have helped boost performance and made it an above-average performer in the U.S. dividend exchange-traded fund (ETF) category.
But April marked a sharp turnaround for tech and growth stocks. As has been the case in the past, tech leadership tends to turn almost every other sector into a laggard. That's cooled the momentum for this fund recently, but I still see a bullish argument for the rest of 2026.
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The case for owning VYM
The Vanguard High Dividend Yield ETF is trading up more than 8% year to date, compared to just over 4% for the S&P 500. It tilts toward higher income and value worked in the early part of 2026, but not in April. A 20% gain for the tech sector in April suggests an overdone rally. That could swing things back in favor of VYM's more cyclical exposure.
One of the factors that drove investors to dividend stocks earlier in 2026 was concerns about valuations and overspending in the tech sector's AI development. In April, some of those fears calmed as companies delivered solid revenue and earnings growth while reiterating AI investment. That swung the pendulum back in favor of tech, which delivered historically good performance last month.
But the longer-term case still favors the Vanguard High Dividend Yield ETF. Investors grew more defensive this year amid concerns about high inflation, slowing growth, a stagnant labor market, and the war in Iran. Those factors usually quickly raise recession risk. These issues haven't gone away yet, but they have been overshadowed over the past month.
The diversified nature of this fund's high-yield portfolio offers some downside risk should the economy deteriorate. But the relatively lower exposure to traditionally defensive areas of the market, such as consumer staples, offers investors the opportunity to participate in risk-on market gains. The large allocation to financials hasn't helped performance, but the fund's lower risk profile could do well if economic measures deteriorate later this year.
VYM: Performance and key metrics
| Metric | Vanguard High Dividend Yield ETF |
|---|---|
| Year-to-date return | 8.3% |
| 1-year total return | 27.5% |
| 3-year annualized return | 16.3% |
| 5-year annualized return | 11.4% |
| Dividend yield | 2.4% |
| Expense ratio | 0.04% |
| Assets under management | $72.6 billion |
| No. of holdings | 612 |
| Top sectors | Financials (20%), industrials (14%), healthcare (13%) |
Data source: Vanguard.
From a high-level view, corporate earnings are looking strong for the S&P 500 in 2026. That should be the rising tide that lifts all boats, even if the Vanguard High Dividend Yield ETF doesn't beat the S&P 500 in the process. Given current economic trends, I like the fund's value tilt and believe it could serve investors well if those trends continue.
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David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.
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