If you’re like many new retirees who could use a nice raise, some of Vanguard’s higher-yielding ETFs (Exchange-Traded Funds) could be worth rotating into, especially if you’re willing to sacrifice some growth and capital appreciation potential.
Either way, Vanguard ETFs are among the most cost-effective ways to land solid dividends and a reasonable amount of long-term growth, especially relative to lower-risk asset classes such as bonds, bond funds, and CDs (Certificates of Deposit). Additionally, gold, while a hot asset in recent years, has had quite the run amid rising macro tensions, but with a lack of dividends, the asset may be worth trading for some income ETFs that will pay you for staying invested.
Let’s check out a pair of Vanguard ETFs that retired investors may wish to pursue in the second half if they’re looking to (safety) give their passive income stream a much-needed boost.
Vanguard High Dividend Yield Index Fund ETF
First up, we have a very popular income ETF in the Vanguard High Dividend Yield Index Fund ETF (NYSEARCA:VYM | VYM Price Prediction), which boasts a decent, but not all too swollen 2.86% yield. Indeed, the yield is on the lower end of the range, thanks in part to a nearly 18% gain off April’s lows. While the distribution yield isn’t quite as generous as a 10-year U.S. Treasury note, which yields closer to 4%, I do think that the VYM offers a much better balance between income in the present and growth for the future.
Indeed, today’s retirees shouldn’t give up on capital gains potential to maximize their yield, especially since life expectancies could go on the rise as AI aims to transform medicine for the better. Indeed, betting against your longevity just doesn’t seem like a very good idea. As such, I think more of a growth (and dividend growth) solution is needed to keep retirees in a spot to stay ahead, even as inflation persists for a longer duration, either due to tariffs or something else.
The VYM may be a “high dividend yield” fund, but I view it as more of a dividend growth fund, though perhaps not as “growthy” as the likes of a Vanguard Dividend Appreciation Index Fund ETF (NYSEARCA:VIG). In any case, the VYM is rich in big banks, big oil, and healthcare firms that have generous upfront yields in addition to impressive, consistent dividend growth trajectories. For retirees who want more yield than the VIG, but still respectable dividend growth prospects, the VYM seems like a sound bet for the retired or just about anyone else seeking the right balance between income and growth.
Vanguard International High Yield Index Fund ETF
What’s better than the VYM? How about an international version with the Vanguard International High Yield Index Fund ETF (NYSEARCA:VYMI)?
The VYMI, which, as the name suggests, invests in international large-cap value stocks with high yields, has an even larger yield of 4.14% and a really low price-to-earnings (P/E) ratio of around 12.4 times, making it a potentially more suitable option for investors looking for cheaper multiples, a bit more yield, and some added geographic diversification.
The ETF, which invests around 80% in developed international markets, with 20% for higher-growth emerging markets, is quite an underrated fund. While the performance has trailed the S&P 500, I do think that the hefty payout and exposure to lesser-known foreign large-caps make the ETF a great addition for those who find the international markets are a bargain compared to the S&P, which may be getting too lofty for the liking of traditional value-minded investors.
In any case, I’m a fan of the VYM and the VYMI for retirees seeking to boost their yield without stunting their portfolio’s longer-term growth potential.
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