Retirees Are Quietly Loading Up on These 3 Vanguard Income ETFs

By Javier Simon Published Jan 14, 11:18AM EST

Key Points

Vanguard’s average fund expense ratio is 0.07% compared to higher industry fees.
VYM holds over 500 dividend stocks with $84B in assets and a 0.06% expense ratio.
VOO tracks the S&P 500 with $1.47T in assets and delivered an 83% five-year return.

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Retirees Are Quietly Loading Up on These 3 Vanguard Income ETFs — © CL STOCK / Shutterstock.com

For a retiree’s portfolio, consistent income and steady growth are key. That’s why many are arming their nest eggs with dividend stocks. These are stocks of companies that make regular payments to shareholders out of their profits. These are typically made on a quarterly or monthly basis.

And dividends can help retirees meet their basic needs in addition to other sources of income like Social Security benefits and pensions. In many cases, dividend paying companies are well established and have strong financials. But investors can also consider dividend paying ETFs.

These are funds that may invest in up to hundreds of dividend paying stocks hand picked by professionals. These fund managers often screen stocks for more than just yield. They also look at companies’ fundamentals, performance, growth potential and other indicators. The top ones are managed by large and well-established financial institutions. Among them is Vanguard.

This investment management giant is known in the industry for its low-fee funds. In fact, the average Vanguard fund expense ratio is 0.07%. This is very important as high fees could take a serious crunch out of a retiree’s returns at a time when income is crucial.

But Vanguard currently offers more than 450 funds. And today, we’re going to narrow it down to three Vanguard ETFs that retirees have been loading up on for income.

Vanguard High Dividend Yield ETF (VYM)

Retirees seeking maximum diversification may not need to look no further than the Vanguard High Dividend Yield ETF (VYM). This fund invests in more than 500 stocks of high-quality companies forecasted to deliver higher than average dividend yields. This ETF in particular delivers a yield of a little over 2%. Furthermore, VYM has delivered an impressive five-year return of over 55%.

VYM is designed to mimic the performance of the FTSE High Dividend Yield Index. Its main holdings include financials, technology and industrials.

This ETF has more than $84 billion in net assets, which could indicate a high level of consumer confidence. It also stands out for its low expense ratio of 0.06%.

Vanguard Value Index Fund ETF (VTV)

The Vanguard Value Index Fund ETF (VTV) invests in large-cap value stocks. These are stocks believed to be undervalued by the overall market. In other words, they may be selling for less than they are actually worth. These are stocks of companies that typically have solid fundamentals like earnings and cash flow. So value stocks give investors the chance to invest in well-equipped companies at a premium. And because of this strong cash flow, many of these companies pay dividends.

Plus, they are often overlooked by Wall Street. So many seek out value stocks in order to gain easy entry into what could potentially be the next big thing. VTV offers exposure to some of the country’s largest value stocks via a single fund. And it has generated a five-year return of nearly 60%. It currently delivers a yield of around 2%.

The fund’s main holdings are in financials, industrials and healthcare. Furthermore, VTV stands out for its more than $217 billion in net assets and its exceptionally low expense ratio of 0.04%.

Vanguard S&P 500 ETF (VOO)

The S&P 500 index is considered to be a reflection of the overall U.S stock market. It represents 500 of the largest U.S. companies. Many investors make S&P 500 index funds a core part of their portfolio for broad exposure to the stock market’s biggest names. And one the lowest cost options out there is the Vanguard S&P 500 ETF (VOO). It has a highly competitive expense ratio of 0.03%. And it has delivered a five-year return of more than 83%.

And tracking the S&P 500, it’s no surprise that the VOO’s main holdings are in the information technology sector. But it’s also diversified across sectors like financials, communication services and consumer discretionary.

Moreover, the VOO holds net assets of around $1.47 trillion. That’s the largest on this list. And it’s important to note its expense ratio of 0.03%. That’s the lowest on our list.

Honorable mention: Vanguard Total Bond Market ETF (BND)

So far, we’ve discussed stock funds. But it’s always important to keep your portfolio diversified. You could consider adding the Vanguard Total Bond Market ETF (BND) to your portfolio. It offers broad exposure to the U.S. bond market (minus inflation-protected and tax-exempt bonds). And it delivers a yield of around 4%. It also has a low expense ratio of 0.04%.

About the Author Javier Simon →

Javier Simon is a contributor for 24/7 Wall St. His work has appeared on major financial publications like Fox Business, The Motley Fool, Money Magazine, and more. He’s experienced in covering a range of personal finance topics including retirement planning, investing, taxes, student loans, and mortgages. He’s also versed in writing in-depth reviews of brokerage and fintech products. Javier earned his bachelor’s degree in multimedia journalism from SUNY Plattsburgh. That’s where he first embarked on his journey into journalism as a staff writer for the award-winning newspaper Cardinal Points. His first professional gig in the world of personal finance was as a staff writer for the fintech company SmartAsset. There, he became a Certified Educator in Personal Finance (CEPF) and led a project producing high-ranking reviews of 529 college savings plans sponsored by different states.