Vanguard High Dividend Yield Index Fund

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abuss368
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Vanguard High Dividend Yield Index Fund

Post by abuss368 » Fri Dec 20, 2019 9:45 pm

Bogleheads -

This is a new fund from Vanguard with an inception date of 2/7/2019 for Admiral shares. The fund presently has a 3.21% yield and is U.S. only.

Does anyone invest in this fund? If so what allocation are you using? What are thoughts and perspectives?
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arcticpineapplecorp.
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Re: Vanguard High Dividend Yield Index Fund

Post by arcticpineapplecorp. » Fri Dec 20, 2019 10:10 pm

maybe not suitable for taxable accounts, where you'd want to reduce, not increase dividend payouts.
In addition to general stock market risks, the fund’s emphasis on slower-growing, higher-yielding companies can also mean that its total return may not be as strong in a significant bull market.

source: https://investor.vanguard.com/mutual-fu ... file/VHYAX

it's classified as "Large Value". How might this differ from Vanguard's Large Cap Value Index fund? (other than this fund is .08% expense ratio instead of .05%):
https://investor.vanguard.com/mutual-fu ... file/vviax

seems like the difference is high yield has a tilt to tech, consumer goods, oil and gas, utilities and basic materials, but the large cap value has a tilt to financials, consumer services, health care, telecomunications and industrials.
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Re: Vanguard High Dividend Yield Index Fund

Post by siamond » Fri Dec 20, 2019 10:36 pm

abuss368 wrote:
Fri Dec 20, 2019 9:45 pm
This is a new fund from Vanguard with an inception date of 2/7/2019 for Admiral shares. The fund presently has a 3.21% yield and is U.S. only.
We assembled a "High Dividend Yield" data series in the Simba backtesting spreadsheet a little while ago. Vanguard launched the investor version of the fund in 2006, Vanguard High Dividend Yield Index Fund. We can go further back in history by using corresponding indices, e.g. FTSE High Dividend Yield TR USD, MSCI USA High Dividend Yield GR USD.

I just took a quick look, and the trajectory over the past 3 decades is nearly identical to VTSAX. A retiree who really likes dividends might be interested, but as we know, this is a flawed reasoning, one should only pay attention to total returns.

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Re: Vanguard High Dividend Yield Index Fund

Post by scripter2002 » Fri Dec 20, 2019 10:45 pm

Curious why a fund such as Vdigx is a bad choice for IRA.

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Re: Vanguard High Dividend Yield Index Fund

Post by grog » Fri Dec 20, 2019 10:57 pm

scripter2002 wrote:
Fri Dec 20, 2019 10:45 pm
Curious why a fund such as Vdigx is a bad choice for IRA.
That fund should be fine in an IRA. But probably not ideal for a taxable account since it has some turnover.

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Re: Vanguard High Dividend Yield Index Fund

Post by MathIsMyWayr » Fri Dec 20, 2019 11:41 pm

grog wrote:
Fri Dec 20, 2019 10:57 pm
scripter2002 wrote:
Fri Dec 20, 2019 10:45 pm
Curious why a fund such as Vdigx is a bad choice for IRA.
That fund should be fine in an IRA. But probably not ideal for a taxable account since it has some turnover.
Someone may favor high dividend funds for whatever reason, e.g., effortless income without having to go through the agony of selling shares.

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Re: Vanguard High Dividend Yield Index Fund

Post by TropikThunder » Sat Dec 21, 2019 1:05 am

abuss368 wrote:
Fri Dec 20, 2019 9:45 pm
Bogleheads -

This is a new fund from Vanguard with an inception date of 2/7/2019 for Admiral shares. The fund presently has a 3.21% yield and is U.S. only.

Does anyone invest in this fund? If so what allocation are you using? What are thoughts and perspectives?
New?? It opened in Nov 2006 as the Investor class VHDYX and ETF VYM. It's not new.

And I'll go back and look again but I'm pretty sure there has been a thread or two on the relative wisdom of selecting funds based on dividend yield. To that end, it's lagged VTSAX in its short life by all measures per Portfolio Visualizer except StdDev (VTSAX has higher CAGR, better Best Year, lower Max Drawdown, and higher Sharpe and Sortino ratios).

Also, I don't think it fits into the Two Fund Portfolio. :P

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Re: Vanguard High Dividend Yield Index Fund

Post by abuss368 » Sat Dec 21, 2019 8:13 am

TropikThunder wrote:
Sat Dec 21, 2019 1:05 am
abuss368 wrote:
Fri Dec 20, 2019 9:45 pm
Bogleheads -

This is a new fund from Vanguard with an inception date of 2/7/2019 for Admiral shares. The fund presently has a 3.21% yield and is U.S. only.

Does anyone invest in this fund? If so what allocation are you using? What are thoughts and perspectives?
New?? It opened in Nov 2006 as the Investor class VHDYX and ETF VYM. It's not new.

And I'll go back and look again but I'm pretty sure there has been a thread or two on the relative wisdom of selecting funds based on dividend yield. To that end, it's lagged VTSAX in its short life by all measures per Portfolio Visualizer except StdDev (VTSAX has higher CAGR, better Best Year, lower Max Drawdown, and higher Sharpe and Sortino ratios).

Also, I don't think it fits into the Two Fund Portfolio. :P
Thanks. I enjoy learning about new funds so thus I asked the question. Personally not considering the fund.
Last edited by abuss368 on Sat Dec 21, 2019 9:31 am, edited 1 time in total.
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Re: Vanguard High Dividend Yield Index Fund

Post by Elysium » Sat Dec 21, 2019 8:52 am

abuss368 wrote:
Sat Dec 21, 2019 8:13 am
TropikThunder wrote:
Sat Dec 21, 2019 1:05 am
abuss368 wrote:
Fri Dec 20, 2019 9:45 pm
Bogleheads -

This is a new fund from Vanguard with an inception date of 2/7/2019 for Admiral shares. The fund presently has a 3.21% yield and is U.S. only.

Does anyone invest in this fund? If so what allocation are you using? What are thoughts and perspectives?
New?? It opened in Nov 2006 as the Investor class VHDYX and ETF VYM. It's not new.

And I'll go back and look again but I'm pretty sure there has been a thread or two on the relative wisdom of selecting funds based on dividend yield. To that end, it's lagged VTSAX in its short life by all measures per Portfolio Visualizer except StdDev (VTSAX has higher CAGR, better Best Year, lower Max Drawdown, and higher Sharpe and Sortino ratios).

Also, I don't think it fits into the Two Fund Portfolio. :P
Thanks. I enjoy learning about new funds so this I asked the question. Personally not considering the fund.
High Dividend is different from Dividend Growth. Focusing only on High Dividend Yield which VYM follows results often in having lower quality companies that are issuing higher yields. This is somewhat similar to High Yield bond investing vs higher quality bonds, not the same, but I am just drawing a broad analogy. Dividend Growth strategy followed by VIG/VDADX instead focuses on companies that are also higher quality by including companies with a history of increasing dividend payout over the years. This is often a sign of financial stability. These companies do not necessarily offer highest dividend yields, but end up being better companies financially.

The difference is there to see in performance, VIG/VDADX had both better performance and lower S/D compared to VYM and VTI. Obviously there are no guarantees this will continue, but if I were to bet on a dividend focused strategy then I would go for VIG instead of VYM.

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Re: Vanguard High Dividend Yield Index Fund

Post by Vanguard Fan 1367 » Sat Dec 21, 2019 9:53 am

If I recall correctly the great John Bogle mumbled something about dividend funds that might be something to consider when investing. I bought the VYM in 2014 and have done fabulously well with it. Now that I spend some time on Bogleheads and have studied the issues I prefer Vanguard's Total Stock Market. But I don't reinvest the dividends with my VYM and let it increase my taxable income each year more than the equivalent amount of Total Stock Market.

It sure beats what some of my friends and acquaintances are doing, with going with 1% assets under management fees, 1% expense ratios, and 5.5% loads.

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Re: Vanguard High Dividend Yield Index Fund

Post by Scooter57 » Sat Dec 21, 2019 9:59 am

If you are interested in high dividend stocks, the last thing you want is a fund that chooses what it invests in based only on the size of the dividend.

Some stocks pay high dividends because the company is wealthy and mature and attracts stockholders by offering steady dividends. Others offer high dividends because the company is skating on thin ice and desperately hoping the outside dividend will attract naive investors.

If you are going to buy high dividend stocks, buy ones that are chosen by applying quality metrics along with those that look at the size of the dividend.

Right now, because of the large number of retirees who have turned to dividend-oriented investing during this period of ridiculously low interest rates, the prices of every high quality dividend-paying stock you might have wanted to own were you inclined to buying dividend-paying stocks have been pushed up so high that the dividends are no longer attractive. (Remember, the amount of the dividend paid stays pretty constant from quarter to quarter, so if the price of a share goes up, the dividend yield for that share goes down.)

The stocks with high dividends nowadays tend to be those whose dividends include a lot of return of capital (REITS, BDCs), very risky companies, and companies that have borrowed unwisely to provide the money needed for the high dividends that keep investors buying the stock of companies that otherwise have little to offer for the future.

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Re: Vanguard High Dividend Yield Index Fund

Post by grog » Mon Jan 13, 2020 12:37 pm

Scooter57 wrote:
Sat Dec 21, 2019 9:59 am
If you are interested in high dividend stocks, the last thing you want is a fund that chooses what it invests in based only on the size of the dividend.

Some stocks pay high dividends because the company is wealthy and mature and attracts stockholders by offering steady dividends. Others offer high dividends because the company is skating on thin ice and desperately hoping the outside dividend will attract naive investors.

If you are going to buy high dividend stocks, buy ones that are chosen by applying quality metrics along with those that look at the size of the dividend.

Right now, because of the large number of retirees who have turned to dividend-oriented investing during this period of ridiculously low interest rates, the prices of every high quality dividend-paying stock you might have wanted to own were you inclined to buying dividend-paying stocks have been pushed up so high that the dividends are no longer attractive. (Remember, the amount of the dividend paid stays pretty constant from quarter to quarter, so if the price of a share goes up, the dividend yield for that share goes down.)

The stocks with high dividends nowadays tend to be those whose dividends include a lot of return of capital (REITS, BDCs), very risky companies, and companies that have borrowed unwisely to provide the money needed for the high dividends that keep investors buying the stock of companies that otherwise have little to offer for the future.
I agree with the above that it is not wise to weight by dividend payout, but, now that I've researched the fund a little bit, I've now realized that isn't an accurate description of what this fund does. I got curious since, despite to the name, this fund does not have an extraordinarily high dividend yield. Turns out it tracks the FTSE High Dividend Yield Index which is a market cap weighted index of companies with above average dividends. So it's essentially TSM with below average dividend companies excluded (notably skipping all the tech giants). I think this is the smart way to do it for a fund like this since it's not deviating as strongly from the market as one might suppose. Vanguard was wise to avoid a strategy that chases higher yield and simultaneously selects for a lot of unattractive characteristics.

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Re: Vanguard High Dividend Yield Index Fund

Post by Schlabba » Mon Jan 13, 2020 12:58 pm

MathIsMyWayr wrote:
Fri Dec 20, 2019 11:41 pm
grog wrote:
Fri Dec 20, 2019 10:57 pm
scripter2002 wrote:
Fri Dec 20, 2019 10:45 pm
Curious why a fund such as Vdigx is a bad choice for IRA.
That fund should be fine in an IRA. But probably not ideal for a taxable account since it has some turnover.
Someone may favor high dividend funds for whatever reason, e.g., effortless income without having to go through the agony of selling shares.
I can relate to that argument. I am not in the drawdown phase of my life yet but I do notice I get quite attached to my investments.
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Re: Vanguard High Dividend Yield Index Fund

Post by grog » Mon Jan 13, 2020 1:24 pm

Schlabba wrote:
Mon Jan 13, 2020 12:58 pm
MathIsMyWayr wrote:
Fri Dec 20, 2019 11:41 pm
grog wrote:
Fri Dec 20, 2019 10:57 pm
scripter2002 wrote:
Fri Dec 20, 2019 10:45 pm
Curious why a fund such as Vdigx is a bad choice for IRA.
That fund should be fine in an IRA. But probably not ideal for a taxable account since it has some turnover.
Someone may favor high dividend funds for whatever reason, e.g., effortless income without having to go through the agony of selling shares.
I can relate to that argument. I am not in the drawdown phase of my life yet but I do notice I get quite attached to my investments.
Just to clarify my comment, VDIGX (not the same fund as VYM) is an actively-manage fund with a dividend growth strategy. It actually has a similar dividend yield as the overall market. My thought was just that it's not ideal to have an active fund in taxable because of capital gains. There is an dividend appreciation ETF called VIG that would seem like a better alternative than VDIGX for taxable.

If you are living on the dividends VYM is probably not too bad for taxable.

GatorBait2018
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Re: Vanguard High Dividend Yield Index Fund

Post by GatorBait2018 » Mon Jan 13, 2020 1:28 pm

Might it make sense to build a full index by storing your high dividend fund in tax advantaged accounts and then a high growth fund in taxable?

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Re: Vanguard High Dividend Yield Index Fund

Post by dru808 » Mon Jan 13, 2020 1:56 pm

I do, the etf, not necessarily for high dividends it’s more valuey than vtv. I have no complaints

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Re: Vanguard High Dividend Yield Index Fund

Post by fortyofforty » Tue Jan 14, 2020 7:38 am

P/E ratio of 17.9% for High Dividend Yield Index versus 21.9% for Total Stock Market. It's a value play, that has underperformed in the short term. I suppose if you believe value will outperform growth, it might make sense. You are dropping the first six out of the top ten holdings of VTI, as of November 30. If technology companies scare you, you might go this route.
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Re: Vanguard High Dividend Yield Index Fund

Post by stan1 » Tue Jan 14, 2020 8:06 am

My suspicion is that high dividend yield equity funds have been "marketed" over the past decade to retirees who are disappointed about low interest rates in fixed income investments. I'm sure the advisors that do this explain the risks, but the client accepts it (perhaps without full understanding) in order to get higher yield. The distinction between dividends, appreciation (unrealized gains), and realized gains is lost. A small percentage of the population thinks like Bogleheads. There are many worse things that could happen.

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