How VYM’s $94.6B Dividend Kings Aided Portfolio Is Beating Treasuries
VYM's trailing yield sits well below what a 10-year Treasury pays today, yet the fund keeps attracting billions in new assets. The reason comes down to what bonds cannot offer and what income investors often overlook when comparing the two.
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Income investors comparing Vanguard High Dividend Yield ETF (NYSEARCA:VYM) with a 10-year Treasury paying roughly 5.3% run into an awkward gap. VYM’s trailing distribution yield is about 2.3%. By following the FTSE High Dividend Yield Index, the ETF targets above-average dividend payers and excludes REITs.
Net assets stood at $94.6 billion in the April filing and $99.2 billion by July. That leaves two questions for an income buyer: whether the yield payout is well covered, and whether total return makes up for the shortfall versus bonds. At the top of the portfolio, the largest holding pays the lowest dividend.
Where VYM’s Quarterly Checks Come From
Over the past 12 months, VYM paid out $3.68 per share. With shares near $158, that’s a trailing yield of 2.3%. The annualized forward rate of $3.55 implies about 2.2%.
All that income is ordinary cash dividends passed through from 616 positions. The fund skips option writing and return-of-capital tricks as yield boosters. Because the index leaves out REITs, a larger share of the income tends to count as qualified dividends, which are taxed at lower rates. That matters if you hold the fund in a taxable account.
The payout changes every quarter. September’s distribution was $0.8869, down from $0.9795 in June but up from $0.8417 a year earlier.
Payments dropped during 2009 and fell to $0.5544 in March 2020. A passive fund can only pay out what its holdings pay, so it has no income buffer of its own in a downturn.
The fund is fairly concentrated at the top. The largest position is about 7.4%, and the 10 largest disclosed positions total about 26% of net assets. These weights come from the fund’s regulatory filing dated July 31, which is published with a delay. FTSE updates the index at scheduled reviews, and Vanguard rebalances to match, so today’s weights may be different.
Four Heavyweights Behind the Payout
Broadcom (NASDAQ:AVGO | AVGO Price Prediction) makes up about 7.4% of the fund but yields only 0.7%. Its $2.60 annual dividend uses roughly 32% of earnings. Earnings rose 215% from the prior year in the latest quarter. The dividend is well covered. The problem is weighting: VYM’s largest position adds little to its yield and ties a significant portion of the fund to the semiconductor cycle.
JPMorgan Chase (NYSE:JPM) is about 3.8% of the fund and yields 1.8%. Its $6 dividend takes up only about 26% of trailing EPS of $23.34, which makes it the best-covered of the four. The main risk for any bank dividend is regulation. Federal Reserve capital rules limit how much banks can return to shareholders when credit conditions decline.
At roughly 2.6% of the fund, Exxon Mobil (NYSE:XOM) yields 2.5%. Its $4.08 dividend uses about 53% of earnings. Exxon raised its quarterly payout from $0.99 to $1.03 in late 2025 and held the dividend at $0.87 through the 2020 oil crash without cutting it. The main risk to watch is crude.
Johnson & Johnson (NYSE:JNJ) has about a 2.5% weight and yields 2.1%. Its dividend coverage ratio is the tightest among the four holdings discussed here. The $5.24 dividend uses about 61% of earnings, and earnings slipped 0.9% from the prior-year quarter. Coverage still holds. J&J raised its quarterly dividend from $1.30 to $1.34 this year and has increased it every year since 2002. A payout ratio near 60% still leaves room for a pharmaceutical company with steady cash flow, and a ratio drifting toward 75% would be the warning sign.
Total Return Is Where VYM Outruns Bonds
Price is where VYM makes up for its lower yield. On a dividend-adjusted basis, the fund is up 12% this year and 14% over 12 months. Over five years it has gained 72%, and over 10 years 197%. A 10-year Treasury bought at today’s yield locks in about 5.3% a year with no income growth.
That edge can shrink quickly. Rising bond yields have recently weighed on dividend stocks, and VYM fell 4% over the past month. Treasuries pay more income with no price risk if held to maturity, while VYM pays less now in exchange for income and principal that can grow.
Verdict: VYM’s distribution is safe. Among its four largest holdings, payout ratios range from about 26% to 61%, and the income is spread across more than 600 companies. No single dividend cut would hurt the payout much, and VYM fits retirees who want quarterly income that can rise over time, plus some stock-market growth. Readers who prefer individual names have options. They can see how we ranked the longest-tenured payers with multi-decade raise runs in a free Dividend Kings report.
Those seeking 5% or more in current income can compare Treasuries or higher-yielding funds. Growth-focused income investors may not like that the biggest holding is a chipmaker yielding under 1%. Three things to keep an eye on: Broadcom’s weight after the next index review, whether J&J’s earnings recover, and whether the December distribution continues September’s year-over-year gain.
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Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad, diverse career, including a stint as creative services director at an NBC affiliate in Austin, Texas, gives him unique insight into the financial industry.
Lee Jackson's journey in the financial industry spans more than 30 years, including nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career spanned pivotal sell-side Wall Street events, from the dot-com rise and bubble to the Long-Term Capital Management debacle, 9/11, and the Great Recession of 2008. This reflects his resilience and adaptability amid market volatility.
Lee Jackson’s practical financial industry experience, gained through a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing across various platforms. This unique combination allows him to shed light on the intricacies of Wall Street in a way only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.
Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.
