VYM’s S&P Beating Dividend Survived Two Decades Without Missing a Payment

Vanguard High Dividend Yield Index Fund ETF Shares (NYSEARCA:VYM) generates income by holding a diversified portfolio of dividend-paying U.S. stocks and passing those dividends directly to shareholders. With $88.5 billion in assets and an ultra-low 0.06% expense ratio, VYM offers cost-efficient exposure to companies that consistently return cash to investors. The fund currently yields 2.45%, slightly above the S&P 500’s typical yield, while maintaining a 19-year uninterrupted payment history since its November 10, 2006 inception.

Financial stocks anchor VYM’s dividend safety, with JPMorgan Chase & Co (NYSE:JPM) representing 4.15% of the portfolio. The bank’s conservative 29% payout ratio creates a substantial cushion that protects payments even during economic downturns, contributing to the fund’s nearly two-decade track record of consistent distributions.

Broadcom Inc (NASDAQ:AVGO) dominates as VYM’s largest position at 7.58%, bringing both opportunity and concentration risk. The semiconductor giant’s 49.2% payout ratio leaves ample room for dividend growth, backed by exceptional profitability. However, the tech sector’s cyclical nature means this oversized position could pressure distributions during industry downturns.

VYM balances cyclical risk through strategic diversification across sectors. Energy holdings like Exxon Mobil Corp (NYSE:XOM) face commodity price volatility, but the company’s 1.70x earnings coverage provides a meaningful safety buffer. Defensive positions in consumer staples and healthcare companies like Johnson & Johnson (NYSE:JNJ)—with its AAA credit rating—offset this cyclicality and stabilize the fund’s income stream during market turbulence.

Dividend growth remained modest in recent years, reflecting VYM’s strategy of spreading risk across hundreds of holdings rather than concentrating in aggressive dividend growers. This approach prioritizes payment stability over rapid income expansion, which explains the fund’s consistent 19-year payment history.

Based on one-year performance data, VYM returned 20.77% compared to the S&P 500’s 15.51%.

The dividend appears sustainable based on underlying company fundamentals, though investors should monitor the outsized Broadcom position and cyclical sector exposures.