VIG vs. VYM: Which Vanguard Dividend ETF Is the Better Buy?

If you're looking for blimpish dividend banal vulnerability successful your portfolio, the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) and the Vanguard High Dividend Yield ETF (NYSEMKT: VYM) person astir apt shown up connected your radar astatine immoderate point.

And for bully reason. They're among the largest dividend ETFs successful the world. They person razor-thin disbursal ratios. They person coagulated semipermanent way records. In short, either would marque a large halfway portfolio holding.

But they're precise different. VIG targets dividend growers. VYM goes aft high-yield stocks. They enactment good unneurotic due to the fact that their compositions thin to beryllium rather different. But what if you privation to ain conscionable one? Does the existent situation favour 1 implicit the other?

Let's enactment the Vanguard Dividend Appreciation ETF and the Vanguard High Dividend Yield ETF broadside by broadside to spot which 1 comes retired connected top.

VIG tracks the show of the S&P U.S. Dividend Growers Index. It targets the stocks of companies that person accrued their dividend payments for the past 10 years, portion excluding the apical 25% highest-yielding companies based connected indicated yearly dividend yield.

Its strategy of considering forward-looking yields and eliminating high-yielders helps guarantee it avoids immoderate of the output traps that could harm wide performance. Its market-cap-weighting methodology, however, gives greater value to bigger companies, not those with amended dividend histories.

VYM tracks the show of the FTSE High Dividend Yield Index. It includes companies whose forecasted dividend payments are higher than average. Real property concern trusts (REITs) are excluded.

Because it uses a wide starting universe, selecting the apical fractional of yields waters down its vulnerability arsenic a axenic high-yielder. The information that it besides market-cap-weights the portfolio means that there's adjacent little accent connected the output facet of the portfolio.

In existent Vanguardian fashion, some ETFs are highly cheap. VIG's and VYM's disbursal ratios of 0.05% and 0.06%, respectively, are among the lowest successful the dividend ETF space.