This year, the Vanguard High Dividend Yield Index Fund ETF (VYM), has performed well as its return total increased by 17%. The Vanguard High Dividend Yield Index Fund (VYM) ETF has performed better than other dividend funds such as the Schwab US Divid ETFs (SCHD), the iShares core high Dividend ETFs (HDV), or the SPDR S&P Diversified ETFs (SDY).
Blue-chip dividend ETF
VYM, a well-known dividend ETF that manages assets worth over $72 billion, is very popular. The fund has an expense ratio (0.06%) that is low.
The fund was established in 2006 and tracks the FTSE High Dividend Yield Index. This index is comprised of companies with higher dividend yields.
It is noteworthy that historically high dividend yielding companies have underperformed the market. Dividend yield can be calculated by multiplying the share price by the dividend amount per year. High-performing companies have lower dividend yields. Nvidia, for example yields only 0.03%.
VYM began trading in 2006 at $28.45 and has since risen to $127. This means that an investment of $10,000 would be worth more than $44,600. If dividends were included, the $10,000 investment would now be worth more than $44,600.
VYM ETF offers a lower dividend yield (2.84%) and growth rate (5.32%) than its rivals.
With a 2.8% return, you cannot expect to see substantial dividends in the long run. All other factors being equal, $10,000 invested will only yield $280 per year. Vanguard S&P ETF (VOO) with its yield of 1.28% will give you about $128 in stock returns.
Top VYM companies
VYM ETF has 550 stocks. The average Price-to-Earnings Ratio is 19.6, lower than S&P’s average 21. The average price-to book ratio is 2.8, which is lower than that of other popular funds.
The Vanguard High Dividend Yield Index Fund is dominated by companies from the Financial Services industry. This sector accounts for 20,8% of its portfolio. The next two industries are industrials and health care, with a share of 12.70% and 12.1%. Consumer discretionary, utilities, and technology are the other major industries that make up this fund.
Broadcom, JPMorgan ExxonMobil Procter & Gamble Johnson & Johnson and Home Depot are the largest companies within this fund. These are all blue-chip firms that have shown years of growth in revenue and profits.
Vanguard High Dividend Yield Fund: Key drivers
Three catalysts could be present for the VYM ETF. The Federal Reserve will continue to cut interest rates at its next meetings. Analysts expect the Federal Reserve to continue cutting interest rates in the coming meetings.
Rate cuts can be positive for the stock market in general, as they cause a shift from bonds to stocks. Investors have piled up over $6.1 trillion of money market funds that will be moved to stocks in the next few months.
These money market funds still earn over 4% in returns. The yield on the 10-year bond remains at 4.02%, while that of the 2-year is 3.95%.
The next catalyst is the start of the earnings season on Friday. JPMorgan will publish the earnings of the fund’s second largest company, JPMorgan. Banks and companies within the financial industry are expected to post weaker earnings due to low net interest income.
ExxonMobil warned in advance that it would have a weak quarter due to the energy price. The situation could be different now that the crude oil price has risen amid ongoing Middle East tensions.
Procter & Gamble will release its quarterly results Thursday, October 18, 2018. It is the largest fast-moving consumers goods company (FMCG), with a valuation of $400 billion. The results are likely to show that the company’s business was under pressure due to the decline in consumer spending.
Broadcom, Walmart Merck and Coca-Cola are the other VYM component companies that you should be watching.
FactSet predicts earnings growth of 4.2% for the entire quarter, marking the fifth consecutive quarter with earnings growth.
VYM ETF Technical Analysis
TradingView VYM Chart
Weekly chart of the VYM ETF shows a bullish trend. The VYM ETF has moved past the critical resistance level of $106.58, which was its high point between 2022-2023. The price was at the top of an ascending triangle.
Vanguard High Dividend Yield Index Fund is still above both the 100-week weighted moving average (WMA) and 50-week WMA.
The Money Flow Index has also moved over the neutral level of 50. Relative Strength Index has formed a chart pattern of a divergence in the direction of bears.
The outlook is therefore bullish for the VYM ETF on the long-term. $135 will be the next level to monitor. The fund could pull back in the short-term, but the $120 mark is the next level to be watched.
The post Key drivers for VYM, a blue-chip dividend ETF (VYM) may change as new information becomes available.
