![]() ![]() My core portfolio holds 14 stocks selected in this subset (more info at the end of this post). However, the ETF performance is real and this subset is hypothetical. VYM underperforms the dividend quality subset by four percentage points in annualized return. Past performance is not a guarantee of future returns. The subset is rebalanced annually to make it comparable with a passive index. The next table compares VYM since inception with a subset of the S&P 500: stocks with an above-average dividend yield, an above-average ROA, a good Altman Z-score, a good Piotroski F-score and a sustainable payout ratio. In previous articles, I have shown how three factors may help cut the risk in a dividend portfolio: Return on Assets, Piotroski F-score, and Altman Z-score. VYM was on par with the benchmark until February 2018, then it started lagging significantly. The next chart plots the equity value of $100 invested in VYM and SPY since VYM inception, reinvesting dividends.Ĭhart: author Data calculated with Portfolio123 The Sharpe ratio of VYM (risk-adjusted performance) is a bit inferior to SPY’s. Since inception in November 2006, VYM has lagged the S&P 500 by 1.9 percentage points in annualized return with a similar risk measured in maximum drawdown and volatility (standard deviation of monthly returns). Valuation ratios are structurally lower in financials, and they are also less meaningful. Fundamental metrics are not comparable across all sectors, especially in the heaviest one. However, these numbers are biased by sector weights. Regarding aggregate valuation metrics, VYM looks much cheaper than the S&P 500. No holding weighs more than 3.6%, so the risk related to individual stocks is limited. They represent about 31.6% of the portfolio value. The next table lists the top 15 holdings with their weights and basic ratios. It underweights technology, consumer discretionary, communication, and it almost ignores real estate. This portfolio is also available as a mutual fund: the Vanguard High Dividend Yield Index Fund Admiral Shares ( VHYAX).Ĭompared to the S&P 500 ( SPY ), VYM overweights financials, consumer staples, utilities and energy. It is a low turnover strategy: during the most recent fiscal year, the portfolio turnover was 11% of its average equity value. It has 411 holdings, a 30-day SEC yield of 2.72% and a total expense ratio of 0.06%.Īs described in the prospectus by Vanguard, the fund invests in “common stocks of companies that pay dividends that generally are higher than average”. The Vanguard High Dividend Yield Index Fund ETF ( NYSEARCA: VYM ) has been tracking the FTSE High Dividend Yield Index since. This dividend ETF review series aims at evaluating products regarding the relative past performance of their strategies and quality metrics of their current portfolios. ![]()
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