The Vanguard High Dividend Yield ETF (NYSEMKT: VYM) has very quietly been a strong performer in 2026. Its double-digit weightings in energy, tech, and industrials have helped boost performance and made it an above-average performer in the U.S. dividend exchange-traded fund (ETF) category.
But April marked a sharp turnaround for tech and growth stocks. As has been the case in the past, tech leadership tends to turn almost every other sector into a laggard. That’s cooled the momentum for this fund recently, but I still see a bullish argument for the rest of 2026.
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The case for owning VYM
The Vanguard High Dividend Yield ETF is trading up more than 8% year to date, compared to just over 4% for the S&P 500. It tilts toward higher income and value worked in the early part of 2026, but not in April. A 20% gain for the tech sector in April suggests an overdone rally. That could swing things back in favor of VYM’s more cyclical exposure.
One of the factors that drove investors to dividend stocks earlier in 2026 was concerns about valuations and overspending in the tech sector’s AI development. In April, some of those fears calmed as companies delivered solid revenue and earnings growth while reiterating AI investment. That swung the pendulum back in favor of tech, which delivered historically good performance last month.
But the longer-term case still favors the Vanguard High Dividend Yield ETF. Investors grew more defensive this year amid concerns about high inflation, slowing growth, a stagnant labor market, and the war in Iran. Those factors usually quickly raise recession risk. These issues haven’t gone away yet, but they have been overshadowed over the past month.
The diversified nature of this fund’s high-yield portfolio offers some downside risk should the economy deteriorate. But the relatively lower exposure to traditionally defensive areas of the market, such as consumer staples, offers investors the opportunity to participate in risk-on market gains. The large allocation to financials hasn’t helped performance, but the fund’s lower risk profile could do well if economic measures deteriorate later this year.
VYM: Performance and key metrics
Metric | Vanguard High Dividend Yield ETF |
|---|---|
Year-to-date return | 8.3% |
1-year total return | 27.5% |
3-year annualized return | 16.3% |
5-year annualized return | 11.4% |
Dividend yield | 2.4% |
Expense ratio | 0.04% |
Assets under management | $72.6 billion |
No. of holdings | 612 |
Top sectors | Financials (20%), industrials (14%), healthcare (13%) |
Data source: Vanguard.
finance.yahoo.com
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