3 hours ago
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David Dierking, The Motley Fool
Fri, May 15, 2026 astatine 10:39 AM CDT 4 min read
When comparing 2 exchange-traded funds (ETFs) with precise akin names, it's a bully default presumption to presume that they're not the same. Dividend ETFs are a large illustration of this. There are implicit 100 dividend ETFs successful the marketplace. Most make their portfolios and make income successful precise antithetic ways.
Take, for example, the iShares Core High Dividend ETF (NYSEMKT: HDV) and the Vanguard High Dividend Yield ETF (NYSEMKT: VYM). Both person "high dividend" successful their names and would, connected the surface, look to beryllium similar. But they're not. There's lone humble overlap. Sector allocations are rather different. Their targeting strategies see unsocial factors.
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If you're weighing whether to see either of these dividend ETFs successful your portfolio, you request to recognize precisely what you're buying first.
HDV vs. VYM: Two precise antithetic high-yield strategies
The iShares Core High Dividend ETF invests successful astir 75 dividend-paying U.S. stocks that person been screened for fiscal health. It uses a brace of Morningstar measures -- the Economic Moat standing and the Distance to Default standing -- to assistance guarantee the companies the scale is targeting person competitory advantages and beardown equilibrium sheets.
In my opinion, this money is the amended axenic high-yield play. The prime surface is ever a bully happening to instrumentality with a high-yield strategy, since it helps debar immoderate of the riskier dividend stocks. The determination to value components by the full dollar magnitude of dividends paid alternatively than output is besides a astute choice. It doesn't needfully destruct the anticipation that a dividend chopped campaigner is included, but it helps debar overweighting those stocks whose yields mightiness beryllium artificially high.
The Vanguard High Dividend Yield ETF invests successful a ample handbasket of 600-plus companies forecast to person above-average dividend yields. From a starting beingness of large-cap stocks, the money volition see the apical fractional of yields for the last portfolio.
This is, successful my opinion, a alternatively bland high-yield strategy. Including much than 600 stocks successful a dividend ETF dilutes the intent of a high-yield strategy. The comparatively humble 2.3% output evidences this. A money similar this should beryllium much selective successful what it includes.
HDV has a output vantage implicit VYM and would beryllium the preferred prime from an income-generation standpoint. HDV's prime screens person helped mitigate downside hazard successful the past, though they've besides contributed to the money underperforming VYM implicit the past decade.
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