If you're looking to invest in dividend-paying stocks, then you'll appreciate the investment objective that the Vanguard High Dividend Yield ETF (VYM +0.40%) pursues. With the goal of choosing high-quality stocks with above-average yields, Vanguard High Dividend Yield makes it simple to put together a diversified portfolio of dividend stocks through a single investment. This investment vehicle has appealed to many investors, and over time, the amount that Vanguard High Dividend Yield has paid to its shareholders has grown exponentially. As annual distributions are on pace to exceed the $750 million mark this year, the ETF seems to be gaining momentum and should be able to keep getting more investors to see the advantages of its focus on blue-chip, income-producing stocks.
What Vanguard High Dividend Yield has paid its investors
Over the past several years, the amount of money that Vanguard High Dividend Yield has paid out as income distributions has risen dramatically. The table below goes back several years, showing the gains in payouts and how they compare with the rise in assets under management over that time frame.
|
Fiscal Year |
Dividend Distributions Paid |
Assets Under Management |
|---|---|---|
|
2017 (as of April 30) |
$386.2 million |
$24.84 billion |
|
2016 |
$565.9 million |
$21.38 billion |
|
2015 |
$487.6 million |
$15.58 billion |
|
2014 |
$334.3 million |
$13.85 billion |
|
2013 |
$241 million |
$9.94 billion |
|
2012 |
$138.4 million |
$5.80 billion |
|
2011 |
$54.2 million |
$2.75 billion |
|
2010 |
$23.3 million |
$1.18 billion |
Data source: Vanguard Group. Figures reflect all share classes.
Fiscal years run from Nov. 1 to Oct. 31 for this Vanguard ETF, so the figure listed for 2017 above is as of the halfway point in the year. Double that figure -- not unreasonable given the upward move in assets under management over the first six months of the fiscal year -- and you get roughly $772 million in dividend distributions.
How does Vanguard High Dividend Yield keep boosting its payouts?
A combination of factors has made it easier for Vanguard High Dividend Yield to keep paying greater amounts of dividend income to its investors. First, the fund has done a good job of attracting assets, with considerable inflows to the fund. A bull market in stocks has helped increase assets under management naturally as well, and combined, those two things have caused a more than 20-fold rise in fund holdings in just a seven-year period.
Another thing that investors shouldn't ignore is that dividend stocks in general have been looking to boost their payouts over time. Vanguard High Dividend Yield doesn't focus as much on dividend growth as other funds, but it still has benefited from the tendency for healthy companies to increase their dividends during strong economic times. That's evident from the fact that dividend payments have risen at an even faster pace than assets under management.
Image source: Getty Images.
Finally, the impact of lower expenses shouldn't be discounted. Vanguard is well-known for its cost controls, and as funds grow, it gets easier for Vanguard to cut its expense ratios. That means less money diverted from investment income to repay fund expenses, leaving more money to go back to shareholders in the form of dividend distributions.
Can Vanguard High Dividend Yield keep growing?
Some people are worried about the future of the stock market and of dividend stocks in particular. Part of the appeal of dividend-paying stocks has come from rock-bottom low interest rates in the bond market, which has made fixed-income alternatives a lot less attractive for many investors. When bank CDs were yielding less than 1%, it made it almost impossible for typical conservative investors to get the income they needed without turning to riskier dividend stocks, and that helped feed a move into the stock market. Now that interest rates have moved higher, some fear a reversal of this trend, although the rises thus far haven't resulted in any major problems for the fund.
Long-term investors understand that high-quality dividend stocks are typically good investments for the long haul. Vanguard High Dividend Yield makes a good long-term holding for such investors, and the stocks that the fund owns are geared toward surviving the ups and downs of business cycles and finding ways to thrive no matter what business environment they face.
Because of its resiliency, Vanguard High Dividend Yield is likely to keep enjoying continued success in the future. With distributions nearing a milestone, shareholders are reaping the rewards -- and those rewards could easily get even sweeter.
