We recently compiled a list of the 10 Best Performing Dividend ETFs In 2024. In this article, we are going to take a look at where Vanguard High Dividend Yield Index Fund ETF Shares (VYM) stands against the other dividend ETFs.
By the end of 2023, the global ETF market had reached $11.1 trillion in assets under management (AUM) and expanded to include 9,149 funds. This growth was driven by several milestones and the diversification of ETF offerings, which now cover equity, fixed income, active management, and alternative strategies. Despite unpredictable factors such as the rise of AI or policy changes, ETFs continue to be a vital investment tool. According to State Street Global Advisors, although only 45% of individual investors in the US use ETFs, nearly 70% of financial advisors and 67% of institutional investors recommend or use them frequently. However, ETFs still make up only 11.25% of the total global investable assets, suggesting there is significant potential for further growth.
Interest in ETFs is rising, particularly among retail investors, with 63% of US investors planning to purchase ETFs in 2024, a sharp increase from 37% during 2022. Active ETFs are experiencing considerable growth, with global inflows hitting a record $166 billion in 2023 and continuing to rise in 2024. Much of this growth is driven by fixed income and alternative investments, while AI-related ETFs, especially in robotics and semiconductors, are attracting large amounts of investment. These trends reflect the growing demand for ETFs as investors seek more flexible and efficient ways to respond to market changes.
A Reuters report from October 2024 highlighted that US ETFs focused on dividend-paying stocks have experienced a significant increase in inflows since the Federal Reserve began its rate-cutting cycle the prior month. In September, 135 US dividend ETFs tracked by Morningstar saw $3.05 billion in inflows, far higher than the average $424 million per month in the first eight months of 2024. However, this trend may slow as US Treasury yields have risen recently, with 10-year Treasury yields hitting a two-month high following strong employment data that suggests the economy is resilient and may not need further large rate cuts.
Dividend ETFs tend to offer stable payouts and potential for growth, addressing challenges regarding unpredictable yields and limited principal growth. However, high-dividend ETFs vary in stability. Some high yields come from struggling companies with weak fundamentals. Riskier ETFs focus on stocks with declining conditions, leading to volatility and potential dividend cuts. Hence, investors should prefer dividend ETFs that manage exposure to unstable companies.
Our Methodology
We curated our list of the best dividend ETFs by choosing consensus picks from multiple credible websites. We have mentioned the year-to-date (YTD) share price performance of each ETF as of December 30, 2024, ranking the list in ascending order of the share price performance. We have also discussed the top holdings of the ETFs to offer better insight to potential investors.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
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Vanguard High Dividend Yield Index Fund ETF Shares (NYSE:VYM)
YTD Share Price Performance as of December 30: 14.48%
Vanguard High Dividend Yield Index Fund ETF Shares (NYSE:VYM) seeks to mirror the FTSE High Dividend Yield Index, which tracks US companies committed to paying higher-than-average dividends consistently. The ETF is designed for investors with long-term objectives who can tolerate market volatility. As of February 27, 2024, the Vanguard High Dividend Yield Index Fund ETF Shares (NYSE:VYM) has an expense ratio of 0.08%. Launched on February 7, 2019, the fund manages total assets of $76.5 billion as of November 30, 2024, with a portfolio comprising 537 holdings. It is one of the best performing ETFs to invest in.
Broadcom Inc. (NASDAQ:AVGO) is the top holding of Vanguard High Dividend Yield Index Fund ETF Shares (NYSE:VYM). Based in Palo Alto, California, Broadcom Inc. (NASDAQ:AVGO) has been around since 1961 and is a big player in the tech world. The company creates and supplies semiconductor devices and software used globally. Broadcom operates in two main segments – Semiconductor Solutions and Infrastructure Software. Its products include system-on-chips (SoCs) for set-top boxes and wireless networks, Ethernet solutions, RF modules, and even industrial components like motion control encoders and optocouplers.
Broadcom Inc. (NASDAQ:AVGO) is no longer overshadowed by Nvidia and is now emerging as a powerhouse with significant growth potential. The Broadcom surge is fueled by the company’s stellar fourth quarter performance, with revenue jumping 51% year-over-year to $14.05 billion, driven by AI solutions and the integration of VMware. Full-year revenue hit a record $51.6 billion, with infrastructure software contributing $21.5 billion. Broadcom Inc. (NASDAQ:AVGO) also returned to profitability, reporting $6.97 billion in adjusted net income for Q4.
AI chips are poised to be Broadcom’s primary growth driver. The company has secured a design contract for Alphabet’s next-generation tensor processing unit (TPU) and counts Meta, ByteDance, OpenAI, and Apple among its key customers. Broadcom Inc. (NASDAQ:AVGO) plans to deploy one million custom AI chips by 2027, targeting a market opportunity of $60–90 billion that year.
On December 12, Broadcom Inc. (NASDAQ:AVGO) declared a $0.59 per share quarterly dividend, an 11.3% increase from its prior dividend of $0.53. The dividend is payable on December 31, to shareholders on record as of December 23.
Broadcom Inc. (NASDAQ:AVGO) was part of 128 hedge fund portfolios at the end of Q3 2024, compared to 130 in the prior quarter. Ken Fisher’s Fisher Asset Management is the leading stakeholder of the company, with 23.4 million shares worth $4 billion.
Overall VYM ranks 8th on our list of the best performing dividend ETFs of 2024. While we acknowledge the potential of VYM as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than VYM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.