If there’s one thing that 2025 has reinforced, it’s the toll that global economic turmoil has taken on investors. During these uncertain times, with further fallout from tariffs still threatening to rear its head, dividend income is more valuable than ever, and one particular dividend ETF , Vanguard’s High Dividend Yield Index Fund ETF Shares (VYM) fund, moves to the front of the line. As the name suggests, this ETF targets large-cap domestic stocks that are on the radar to pay higher-than-average dividend yields based on forward dividend yield.
Using the FTSE High Dividend Yield Index as a benchmark, the VYM ETF pays a dividend yield of 2.5%, compared with the S&P 500’s current average dividend yield of a much smaller 1.2%. For investors who are looking for quarterly checks in the mail, the VYM ETF pays dividends like clockwork, ensuring passive income even during times of heightened economic uncertainty.
Additionally, VYM is on pace for a 10.4% year-to-date return, while over the past 12 months it has delivered an even juicier 12%, keeping pace with a broader stock market that has been generating double-digit percentage annual returns of late. With a super low expense ratio of 0.06%, compared with an average in this fund category of 0.87%, investors are able to pocket much of those profits. When you tack on quarterly distributions of $0.841700 per share, you have yourself a tidy investment whose dual purpose will bolster your portfolio and pad your bank account despite a most uncertain economy.
VYM ETF Standouts
During times of heightened economic uncertainty, one common theme that savvy investors strive for is diversification. With Vanguard’s VYM ETF, you get just that, including exposure to nearly 600 stocks with an average market capitalization of $148.4 billion across sectors of the economy. Rather than buying each one of these stocks individually, you can gain exposure to sectors ranging from consumer staples to energy to technology, with their high-yielding dividends attached, through one streamlined ETF.
Among the top names based on their ETF weightings in the fund include semiconductor play Broadcom (Nasdaq: AVGO), financial institution JPMorgan (NYSE: JPM), energy stock Exxon Mobil (NYSE: XOM), pharma giant Johnson & Johnson (NYSE: JNJ) and big-box retailer Walmart (NYSE: WMT).
Exxon Mobil boasts a trailing dividend yield of 3.5% and forward dividend yield of nearly 4%, justifying its weighty position in Vanguard’s VYM ETF. Exxon Mobil is also a member of the Dividend Aristocrat club, given its track record of raising dividends for at least 25 consecutive years. Exxon Mobil, whose annual dividend is now $3.96 per share, has increased its cash payout steadily for the past 42 years and is on its way to becoming a Dividend King.
Technology stocks are growth plays and therefore aren’t famous for high dividends, explaining Broadcom’s trailing dividend yield of 0.70%. But where AVGO lags on dividend yield it makes up for in performance, with its stock having delivered year-to-date returns of a whopping 45%. Broadcom belongs in VYM for its potential to deliver attractive returns over the long haul. Further, Broadcom carries a predicted forward dividend yield of a higher 2.4%, surpassing the average dividend yield of the broader stock market.
VYM ETF Performance
Dividend yield reflects the amount of income you can expect to roll in based on every dollar you have invested in the stock or in this case the ETF. Based on the current trailing yield, investors can expect to earn approximately $25 in annual income for every $1,000 invested in Vanguard’s VYM ETF. Now let’s compare this with the income you can expect from another ETF, say Vanguard S&P 500 ETF (VOO). The VOO ETF pays a dividend yield of 1.1%, resulting in $11 in annual dividend income for a $1,000 investment in this fund.
While VYM’s expense ratio of 0.06% is slightly higher than that of VOO (0.03%), investors still come out ahead with the income from the higher-yielding VYM ETF. On the flip side, market returns from Vanguard’s VOO ETF have outperformed those of VYM. But for income-focused investors, VYM outshines its peer with less volatility than the broader stock market along the way.
Don’t Rock the Boat
In an era of whipsaw markets, VYM shines as a defensive play, offering a steadier ride than the roller coaster markets. That’s because Vanguard’s VYM ETF is built to weather market storms by focusing on high-dividend stalwarts that don’t swing quite as wildly as some of their peers. With a five-year beta (a yardstick of sensitivity to market moves) of just 0.85, it is much less volatile than the broader S&P 500, exhibiting a three-year standard deviation of 14.65%. VYM’s five-year beta of 0.85 means for every 1% the broader market (think S&P 500) shifts, VYM typically budges just 0.85% in the same direction. That’s about 15% less drama, making it a calmer companion especially when combined with its steady stream of dividend payments.
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