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Which Vanguard Etfs Offer The Highest Dividend Yields?
Investors can find plenty of great exchange-traded funds (ETFs) to generate income. Vanguard, one of the biggest fund managers around, offers 88 ETFs. All of them return money to shareholders via distributions.
Vanguard's bond ETFs currently pay the highest distributions. However, if you're looking for juicy dividends from Vanguard, you're also in luck. Which Vanguard ETFs offer the highest dividend yields?
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1. Vanguard Utilities ETF
The Vanguard Utilities ETF (NYSEMKT: VPU) ranks at the top of the list, with a U.S. Securities and Exchange Commission (SEC) yield of 2.98%. The SEC yield, by the way, is a metric developed by the SEC to help investors compare funds. It uses the projected dividend yield (for stock ETFs) over a trailing-30-day period.
It shouldn't be surprising that this Vanguard ETF offers the highest dividend yield. Utility stocks have been a long-time favorite for income investors. The Vanguard Utilities ETF owns 70 U.S. utility stocks. Its top holdings include NextEra Energy, Southern Company, Duke Energy, Constellation Energy, and Sempra Energy.
Many utility stocks have been sizzling hot over the last 12 months. So was the Vanguard Utilities ETF, which is up more than 20%. That's over twice the average return for the fund since its inception in early 2004. Surging energy demand from data centers, fueled by organizations jumping on the generative artificial intelligence (AI) bandwagon, and the anticipation of Federal Reserve interest rate cuts served as key catalysts.
As is the case with most Vanguard funds, your costs of owning this ETF are minimal. The Vanguard Utilities ETF's annual expense ratio of 0.1% is much lower than the 0.99% average expense ratio of similar funds.
2. Vanguard Energy ETF
The Vanguard Energy ETF (NYSEMKT: VDE) is running neck-and-neck with the Vanguard Utilities ETF. Its SEC yield is 2.97%. The yields of the two funds are so close that they could easily swap positions multiple times over the coming months.
As its name indicates, this Vanguard ETF focuses on the energy sector. It owns 112 energy stocks with top holdings including ExxonMobil, Chevron, ConocoPhillips, EOG Resources, and Williams Companies.
Since its inception in September 2004, the Vanguard Energy ETF has delivered an average annual return of 7.15%. However, the ETF has beaten that average over the last 12 months. It hasn't been a steady upward climb, though. Fluctuating oil prices have contributed to significant volatility for the fund.
Don't be surprised if the rollercoaster ride continues in 2025. The second Trump administration's focus on deregulation and corporate tax cuts could help the energy sector. However, if domestic oil production increases too much, oil prices could fall and drag the Vanguard Energy ETF down.
3. Vanguard High Dividend Yield ETF
You'd think an ETF named Vanguard High Dividend Yield ETF (NYSEMKT: VYM) to provide attractive dividends. And you'd be right. This ETF offers an SEC yield of 2.68%.
The Vanguard High Dividend Yield ETF attempts to track the performance of the FTSE High Yield Dividend Index, which focuses on U.S. large-cap stocks with high dividend yields. The ETF's portfolio includes 537 stocks with a median market cap of $148.5 billion. Its top five holdings are Broadcom, JPMorgan Chase, ExxonMobil, Procter & Gamble, and Walmart.
Large-cap stocks have driven the current bull market. Although the Vanguard High Dividend Yield ETF hasn't performed as well as the S&P 500 over the last 12 months, the fund has delivered a solid return significantly above its average gain of 8.61% since its inception in November 2006.
This ETF is even more cost-effective than the other two Vanguard ETFs with the highest dividend yields. Its annual expense ratio is a low 0.06%, only a fraction of the 0.89% average expense ratio of similar funds.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Keith Speights has positions in Chevron, ExxonMobil, and Williams Companies. The Motley Fool has positions in and recommends Chevron, EOG Resources, JPMorgan Chase, NextEra Energy, Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF, and Walmart. The Motley Fool recommends Broadcom, Constellation Energy, and Duke Energy. The Motley Fool has a disclosure policy.
