3 high-yield dividend ETFs for income investors

Vanguard High Dividend Yield ETF (VYM)

VYM is passively managed and tracks the FTSE High Dividend Yield Index, which screens its holdings for higher-than-average dividend yields. Currently, this ETF has a total of 442 holdings, and skews towards the large-cap value section of the equity stylebox. 

Since its inception, VYM has consistently lagged the overall U.S. stock market, but strongly outperformed in 2022. Year-to-date, VYM is up 3.18%, mainly due to its higher weighting of consumer staples (12.70%), and energy (10.60%) stocks compared to the U.S. stock market. 

The other reason could be VYM's higher allocation to large-cap value stocks. Value stocks have performed strongly in 2021 and 2022. Vanguard actually conducted research on VYM and concluded that its returns could be explained by higher exposure to low volatility and value risk factors. 

Currently, VYM has a 30-day SEC yield of 2.83%, which is its hypothetical annualized dividend yield based on the ETF's holdings over a trailing 30-day period. The ETF pays distributions on a quarterly basis and charges a low expense ratio of 0.06%. 

iShares Core High Dividend ETF (HDV)

HDV takes a slightly different approach than VYM. This ETF tracks the Morningstar Dividend Yield Focus Index, which only holds 75 U.S. stocks screened for above-average yields, healthy balance sheets, and an economic moat, which measures the durability of their competitive advantage.

Compared to VYM, we see a much higher allocation to energy (25.77%), healthcare (23.90%), and surprisingly information technology (11.33%). HDV also has a much higher 30-day SEC yield of 4.02%. It also makes quarterly distributions and has never made a capital gains distribution. 

HDV strongly outperformed VYM in 2022, largely thanks to its much higher allocation to energy stocks. As of December 20th, the ETF is up 9.93% year-to-date with dividends reinvested. HDV does charge a slightly higher expense ratio than VYM at 0.08%. 

SPDR Portfolio S&P 500 High Dividend ETF (SPYD)

Investors seeking the brand-name recognition of the S&P 500 can use SPYD to target the top 80 highest-yielding stocks in the index. The ETF costs an expense ratio of 0.10%. Compared to VYM and HYD, SPYD is weighted heavier to financials (21.23%), followed by utilities (15.35%) and real estate (14.32%).

Notably, SPYD does not adhere to a traditional market-cap weighted approach. The ETF targets an equal weight for its 80 holdings. Right now, Gilead is the largest holding at 1.84%, with V.F. Corporation being the smallest at 0.71%. This is because the ETF is between rebalancing periods. 

By now, readers might have noticed that despite all three ETFs belonging to the "dividend" investing strategy, their portfolio composition and especially sector representation is markedly different. Therefore, they might not be the best tax-loss harvesting partners for each other.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.