VYM’s 2.2% Yield Hides $141,000 in Decade-Long Underperformance Versus the S&P 500

A retiree who put $300,000 into the Vanguard High Dividend Yield ETF (NYSEARCA:VYM) ten years ago and reinvested every dividend now sits on roughly $922,110. The same $300,000 in the S&P 500 is now worth about $1,063,230. That is roughly $141,000 quietly forfeited in exchange for a yield that never cracked 3%.

What You Are Actually Paying

VYM charges an expense ratio of just 0.04%, equal to about $4 annually for every $10,000 invested. That makes it cheaper than the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) at 0.06% and only slightly more expensive than the Vanguard S&P 500 ETF (NYSEARCA:VOO) at 0.03%. If fees were the only cost that mattered, the analysis could end here.

The real bill is the gap in total returns. Over the past ten years, VYM returned 207.37%. SCHD returned 233.97%. SPDR S&P 500 ETF Trust (NYSEARCA:SPY) returned 254.41%. On $300,000, that spread compounds into roughly $79,800 given up versus SCHD and $141,120 given up versus the plain S&P 500. The trailing yield explains the tradeoff clearly: VYM currently pays $3.6303 on a $165.63 share, about a 2.2% trailing yield, while SCHD runs closer to 3.1%. VYM investors accepted the lower yield, and as a result, a lower total return.

The Part the Factsheet Does Not Highlight

Let’s start with the portfolio itself. VYM holds 400+ positions. Its largest single holding is Broadcom at 8.028%, a semiconductor name whose narrative today is driven by artificial intelligence rather than income. Add JPMorgan Chase at 3.344%, Exxon Mobil at 2.715%, and Johnson & Johnson at 2.303%, and you have a giant, benchmark-hugging basket of large-cap value that overlaps heavily with any total-market fund a reader likely already owns. Essentially, the fund provides closet indexing, while presenting as a dividend fund.

Then there is the tax drag. VYM’s quarterly distributions can vary considerably, ranging from $0.6555 per share in the first quarter of 2024 to $1.0237 in the second quarter. Investors holding the fund in a taxable account also owe taxes on those distributions each year, even when they reinvest the income. For long-term investors, that creates another layer of drag beyond the fund’s 0.04% expense ratio.

The Cheaper Mirror

SCHD applies a tighter screen: roughly 139 equity positions, concentrated in names like QUALCOMM at 6.74%, Texas Instruments at 5.90%, and UnitedHealth at 5.09%. Higher trailing yield, higher ten-year return, at 2 basis points more in fees.

If the goal is broad U.S. equity, the Vanguard S&P 500 ETF (VOO) delivers the market at 0.03% and has beaten VYM by roughly 47 percentage points over the last decade. The tradeoff with SCHD is a narrower, more concentrated screen. The tradeoff with VOO is a lower headline yield but higher total return.

What This Means for You

The real question is whether you are paying a hidden opportunity cost to feel the comfort of a quarterly deposit. If the answer to “what do I actually own” is 400 large-cap value stocks led by a semiconductor giant, the yield label may be doing more marketing than investing. Ask what the last decade would have looked like in a portfolio measured by ending dollars rather than dividends collected.

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