Many Vanguard exchange-traded funds (ETFs) pay dividends on a regular basis, typically monthly or quarterly. Vanguard ETFs specialize in one specific area within stocks or the fixed-income realm.
The investments in stocks or bonds that the funds make typically pay dividends or interest, which Vanguard distributes back to its shareholders in the form of dividends to meet its investment company tax status.
Vanguard offers many different ETFs that specialize in specific sector stocks, stocks of a certain market capitalization, foreign stocks, and government and corporate bonds of different durations and levels of risk. The majority of Vanguard ETFs are rated three or four stars by Morningstar, Inc., with some funds having two or five stars.
Key Takeaways
- Vanguard is a large investment advisor offering mutual funds and ETFs, many of which pay dividends.
- Most of Vanguard's ETF products pay monthly or quarterly dividends.
- Expense ratios are the fees investors pay for investing in a fund; the lower the better.
- Vanguard ETFs are noted in the industry for their lower-than-average expense ratios.
Understanding Vanguard ETF Dividends
Vanguard ETF Expense Ratios
One of the more unique features of Vanguard funds, in general, is they are known in the fund industry for expense ratios that are lower than average. As of Jan. 2024, Vanguard ETFs' expense ratios range between 0.03% and 0.22%, while the average expense ratio as of Dec. 2021 (latest information) is about 0.06% for a typical Vanguard ETF, compared to an industry average of 0.24%.
The most expensive Vanguard ETFs tend to be those that invest overseas or have high turnover ratios and specialize in very narrow market niches. The least expensive Vanguard ETFs tend to be those that specialize in corporate or Treasury bonds.
Note
Many investment advisors offer funds with 0% expense ratios.
Vanguard ETF Dividend Yields
ETFs are typically judged on their dividend distributions based on a 30-day SEC yield, which is a standardized yield developed by the Securities and Exchange Commission (SEC) for the fair comparison of funds. The 30-day SEC yield is calculated based on the last 30-day period and reflects investment income earned by a fund after deducting its expenses.
Vanguard ETFs pay dividends either monthly or quarterly. The 30-day SEC yields for Vanguard ETFs range between 0.45% and 6.71% as of Dec. 31, 2023.
What Is an Expense Ratio?
An expense ratio is a percentage that an investment advisor charges investors for administrative and operating expenses. Expense ratios reduce investors' returns, so it's always a good idea to look for funds with low expense ratios. Generally, passively managed funds will have lower expense ratios than actively managed funds.
Is a Mutual Fund Better or an Exchange-Traded Fund (ETF)?
Whether a mutual fund or an exchange-traded fund (ETF) is better will depend on the investor and their goals. ETFs have significantly gained in popularity due to the ease of buying and selling them like stocks through online brokerage accounts. Many of them also come with low expense ratios.
How Do Fund Dividends Work?
Investors in mutual funds or ETFs do not actually own the shares of the companies that the funds invest in; they only own a portion of the fund. However, any shares that pay dividends, those dividends are then passed onto the investor of the mutual fund or ETF directly into their account.
Which ETF Pays the Highest Dividend?
According to VettaFi, the Simplify Tail Risk Strategy ETF pays the highest dividend. It has a dividend yield of 234.58%. The next highest is YieldMax TSLA Option Income Strategy ETF, which pays out a dividend yield of 94.44%; much smaller in comparison to the Simplify ETF. Other managers who offer high-yielding dividend funds include GraniteShares, CICC, and Tidal Investments.
The Bottom Line
Vanguard is a large investment advisor offering a variety of investment funds. Many of these have low expense ratios, providing affordable investment options for investors. Of the stocks in the funds that pay dividends, Vanguard pays out those dividends to holders of the funds. Investors can use dividend-yielding funds to complement their portfolios in order to generate an income stream, which is particularly beneficial for risk-averse investors or those nearing or in retirement.
FAQs
Just like mutual funds, ETFs distribute capital gains (usually in December each year) and dividends (monthly or quarterly, depending on the ETF).
Which Vanguard ETF pays the highest dividend? ›
ETFs: ETF Database Realtime Ratings
| Symbol Symbol | ETF Name ETF Name | 1 Year 1 Year |
|---|
| VIG | Vanguard Dividend Appreciation ETF | 19.01% |
| VYM | Vanguard High Dividend Yield Index ETF | 19.59% |
| VYMI | Vanguard International High Dividend Yield ETF | 19.71% |
| VIGI | Vanguard International Dividend Appreciation ETF | 10.31% |
2 more rowsAn ETF is essentially a diversified set of securities and as such, acts as a microcosm of a whole portfolio of investments. In the same way you may receive income (known as dividends) from individual investments within a portfolio, an ETF receives income from the companies or securities it holds.
Does Vanguard S&P 500 ETF pay dividends? ›
Dividend Summary
There are typically 4 dividends per year (excluding specials), and the dividend cover is approximately 1.0.
Do Vanguard ETFs automatically reinvest dividends? ›
Transfer to a Vanguard® fund.
Use our Directed Dividend Plan to have your dividends and/or capital gains distributions reinvested automatically in shares of another identically registered Vanguard holding.
Are monthly dividend ETFs worth it? ›
Benefits Of Monthly Dividend ETFs
Monthly dividends have their advantages. For one, they're better than quarterly dividends for covering living expenses. You only have to budget the income 30 days at a time, rather than 90. Monthly payouts are also convenient for reinvesting.
What is the best ETF to buy in Vanguard? ›
10 Best-Performing Vanguard ETFs
| Ticker | Company | Performance (1 Year) |
|---|
| VUG | Vanguard Growth ETF | 30.68% |
| VONG | Vanguard Russell 1000 Growth Index ETF | 30.25% |
| VOX | Vanguard Communication Services ETF | 29.18% |
| VGT | Vanguard Information Technology ETF | 27.19% |
6 more rowsMay 1, 2024
Top 100 Highest Dividend Yield ETFs
| Symbol | Name | Dividend Yield |
|---|
| QQQY | Defiance Nasdaq 100 Enhanced Options Income ETF | 45.42% |
| AMDY | YieldMax AMD Option Income Strategy ETF | 43.14% |
| NFLY | YieldMax NFLX Option Income Strategy ETF | 38.32% |
| FBY | YieldMax META Option Income Strategy ETF | 36.61% |
93 more rowsVanguard is a large investment advisor offering mutual funds and ETFs, many of which pay dividends. Most of Vanguard's ETF products pay monthly or quarterly dividends.
How do I know if my ETF pays dividends? ›
If you're interested in investing in an ETF that produces regular income that is paid directly to you, check the prospectus to find out whether dividends are paid out to investors or reinvested in the fund.
Because of their wide array of holdings, ETFs provide the benefits of diversification, including lower risk and less volatility, which often makes a fund safer to own than an individual stock. An ETF's return depends on what it's invested in. An ETF's return is the weighted average of all its holdings.
What ETF has the highest dividend? ›
- Alerian MLP ETF (AMLP)
- First Trust Preferred Securities and Income ETF (FPE)
- ProShares S&P 500 High Income ETF (ISPY)
- VanEck BDC Income ETF (BIZD)
- Invesco Senior Loan ETF (BKLN)
- SPDR Blackstone High Income ETF (HYBL)
- SPDR Portfolio S&P 500 High Dividend ETF (SPYD)
VOO Dividend Information
VOO has a dividend yield of 1.32% and paid $6.41 per share in the past year. The dividend is paid every three months and the last ex-dividend date was Mar 22, 2024.
Do you pay taxes on ETF dividends? ›
Dividends and interest payments from ETFs are taxed similarly to income from the underlying stocks or bonds inside them. For U.S. taxpayers, this income needs to be reported on form 1099-DIV. 2 If you earn a profit by selling an ETF, they are taxed like the underlying stocks or bonds as well.
How do Vanguard ETF dividends work? ›
If you own stocks through mutual funds or ETFs (exchange-traded funds), the company will pay the dividend to the fund, and it will then be passed on to you through a fund dividend. Because dividends are taxable, if you buy shares of a stock or a fund right before a dividend is paid, you may end up a little worse off.
Is it better to take dividends or reinvest? ›
Your Money Will Grow Exponentially Thanks To Compounded Growth: Arguably the best advantage of dividend reinvestment is that it allows you to buy more shares of the same stock and build wealth over time. By purchasing more shares of the same stock with passive dividends, your investment grows further as you reinvest.
What is the highest paying dividend ETF? ›
Top 100 Highest Dividend Yield ETFs
| Symbol | Name | Dividend Yield |
|---|
| TSLY | YieldMax TSLA Option Income Strategy ETF | 56.09% |
| TILL | Teucrium Agricultural Strategy No K-1 ETF | 51.43% |
| KMET | KraneShares Electrification Metals Strategy ETF | 49.75% |
| NVDY | YieldMax NVDA Option Income Strategy ETF | 47.70% |
93 more rowsThere are three reasons the Vanguard High Dividend Yield ETF is an attractive investment. First, it carries a very low expense ratio of 0.06%, meaning the annual fee would total $6 on every $10,000 invested in the fund. The average expense ratio on similar funds is 0.9%, according to Vanguard.
Is Voo or VYM better? ›
VOO - Volatility Comparison. The current volatility for Vanguard High Dividend Yield ETF (VYM) is 2.77%, while Vanguard S&P 500 ETF (VOO) has a volatility of 3.01%. This indicates that VYM experiences smaller price fluctuations and is considered to be less risky than VOO based on this measure.
Which Vanguard fund has the highest return? ›
Top performing investment funds owned by Vanguard worldwide 2024, by one-year return. As of May 2024, the Vanguard Communication Services Index Fund provided the highest one-year return rate. The Vanguard Mega Cap Growth Index ranked second having a one-year return rate of 37.4 percent.
