Quick Read – The fund’s income stream relies heavily on five mature cash generators: Johnson & Johnson, Procter & Gamble, Coca-Cola, Exxon Mobil, and AbbVie. – VYM’s distribution is durable for retirees, with four anchor holdings having fortress-like payout ratios that leave…
om for dividend growth even in recessions. – The analyst who called NVIDIA in 2010 just named his top 10 stocks and Vanguard High Dividend Yield ETF wasn’t one of them. Get them here FREE
The Vanguard High Dividend Yield Index Fund ETF Shares (NYSEARCA:VYM) is one of the simplest income vehicles in the market: it owns roughly 500 U.S. stocks that pay above-average dividends, weights them by market cap, and passes the cash through to shareholders. VYM tracks the FTSE High Dividend Yield Index, which excludes REITs and screens companies by forecast dividend yield. With an ultra-low expense ratio and a portfolio dominated by mature cash generators, VYM has become a default holding for retirees relying on the distribution to fund living expenses.
The question here is whether that income is durable. How the distribution is actually generated Every dollar VYM pays out comes from dividends collected on the underlying stocks; the fund uses no options income or leverage. That means the safety of VYM’s distribution is the weighted-average safety of its holdings, with extra emphasis on the names at the top.