The S&P 500 Barely Yields Anything. This Vanguard ETF Pays Roughly Double It
When cash pays more than stocks and the S&P 500 barely covers your morning coffee budget, retirees living off dividends need a smarter equity strategy than simply tracking the index.
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If you are living on portfolio income in 2026, the S&P 500 is not doing you many favors. The broad index yields barely more than 1%, while the 10-year Treasury sits above 5% as of Sept. 24. Cash beats stocks for coupon clippers right now, which is exactly why the equity income sleeve of your portfolio needs to actually earn its keep. Three funds do that job well: the Vanguard High Dividend Yield ETF (NYSEARCA:VYM), the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) and the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG). VYM is the headline act, and today it pays roughly double what the index does.
Yield Math That Actually Works for a Retiree
VYM has paid $3.6755 per share in trailing twelve-month distributions, with an annualized forward payout of $3.5476. Against a share price of $157.37 on Sept. 24, that works out to roughly 2.2% forward. The S&P 500, using SPY as a proxy, paid $7.582717 in trailing dividends on a share priced near six times VYM, which lands the broad-index yield close to 1.1%. Roughly double. The headline holds.
VYM distributes quarterly, with the most recent ex-date on Sept. 18, and payment on Sept. 22. If you build a bond-ladder-style income schedule, that cadence slots in neatly.
What You Actually Own Inside VYM
VYM tracks the FTSE High Dividend Yield Index and screens U.S. stocks whose forecast yields sit in the upper half of the dividend-paying universe. That produces a value-tilted book of roughly 500 names. The fund holds around $94.6 billion in net assets and has been running since Nov. 10, so it is battle-tested through two bear markets.
The top holdings read like a checklist of cash-generating incumbents: Broadcom at 8.03% of assets, JPMorgan Chase at 3.34%, Exxon Mobil at 2.72%, Johnson & Johnson at 2.30% and Caterpillar at 1.72%. Round out the top slice with AbbVie, Cisco, Chevron, Bank of America, Home Depot, and Coca-Cola, and you have a portfolio built on financials, healthcare, consumer staples, and energy, with meaningfully less megacap tech than the S&P 500.
The cost side helps too. VYM charges an expense ratio in the neighborhood of 0.06%, meaning you keep about $994 of every $1,000 working. Over a 20-year retirement, that fee gap versus a 0.60% active dividend fund compounds into real money.
Where SCHD and VIG Fit Alongside
SCHD screens for quality first, yield second. It leans on return-on-equity and dividend-growth filters, which historically has produced a yield in the same zip code as VYM but with less energy exposure. Pair it with VYM and you diversify the selection methodology without diluting income much.
VIG is the growth complement. It targets companies with long records of raising dividends, so the current yield is lower, but the payout typically grows faster. For a retiree who worries about a 20-year inflation runway, a slice of VIG hedges the risk that VYM’s yield-first names turn into value traps.
Trade-Offs to Know
VYM is not going to keep pace when megacap AI names lead the market. The fund’s YTD price return of 12.04% and one-year return of 15.54% are respectable, but its five-year return of 74.38% lags the S&P 500 over the same window because you own less Nvidia, Microsoft, Apple and Meta. The heavy financials and energy weightings also mean the fund catches a cold when credit spreads widen or oil breaks down. That is the price of the higher yield.
Who Should Own This
If you are a retiree or near-retiree who needs your equity sleeve to actually pay you, VYM fits at the core of that sleeve for many income-focused investors, often alongside SCHD for methodology diversification and a smaller VIG position for dividend growth. The whole point is to live off the checks without ever having to sell a share, which is the exact structure we walked through in a free dividend ladder guide here. If you are 35 and compounding, the S&P 500 may fit better than VYM. The yield is only worth the tech underweight if you plan to spend the checks.
Contact [email protected] for any questions or corrections.
Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.
He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.
