How does the VAS dividend compare to a high-yield ETF?

The letters ETF on wooden cubes with golden coins on top of the cubes and on the ground

The letters ETF on wooden cubes with golden coins on top of the cubes and on the ground

One of the traits that many investors find attractive about ASX shares is the dividends. Compared to many other markets around the world, especially the US, ASX shares offer very high dividends on average. Just think, four out of the top six shares on the S&P/ASX 300 Index (ASX: XKO) are the big four banks. And the largest share on our share market by market capitalisation is BHP Group Ltd (ASX: BHP), which has arguably made a name for itself in recent years as a dividend machine. Thus, an exchange-traded fund (ETF) like the Vanguard Australian Shares Index ETF (ASX: VAS) should have the same reputation.

VAS is the most popular ETF on the ASX. It is the only ETF that covers the ASX 300 Index, thus tracking 300 of the largest shares on the share market. And since it holds BHP and the big four banks, as well as other ASX dividend shares like Woolworths Group Ltd (ASX: WOW) and Telstra Corporation Ltd (ASX: TLS), it has some impressive dividend distribution chops of its own to brag about.

As it currently stands, VAS has paid out $4.66 in dividend distributions per unit over the past 12 months. On the current VAS unit price of $93.32, that gives this ETF a trailing yield of 4.99%. That is a very solid yield at any standard.

So how do VAS’s dividend distributions stack up?

But at its core, VAS is an index fund, not a dividend ETF. And the ASX has many other ETFs that purely focus on dividend income. So how does VAS’ income potential stack up against ETFs that actually prioritise income?

Well, let’s investigate. Vanguard itself runs an income-focused fund called the Vanguard Australian Shares High Yield ETF (ASX: VHY). Instead of the 300 or so holdings that VAS boasts, VHY instead only holds 64 dividend-paying shares.

Over the past 12 months, this ETF has paid out a total of $3.22 in dividend distributions per unit. On the current VHY unit price of $68.79, that gives this ETF a trailing yield of 4.68%. So yes, it appears Vanguard’s High Yield ETF currently has a lower trailing distribution yield than the Vanguard Australian Shares ETF.

The iShares S&P/ASX Dividend Opportunities ETF (ASX: IHD) is another income-focused fund that is popular on the ASX. It also holds a more concentrated portfolio of ASX dividend payers at 48. Its current trailing yield sits at 5.22%. 

So it’s a bit of a mixed bag when it comes to high-yield ETFs compared to VAS. A thought to leave on though. Even though the iShares ETF offers the best yield of these three funds, it has returned a total of 5.81% per annum on average over the past 10 years. In contrast, VAS has almost doubled that return over the same period, giving its investors an average of 10.02% per annum. So high yields don’t always equate to higher returns. 

The post How does the VAS dividend compare to a high-yield ETF? appeared first on The Motley Fool Australia.

Should you invest $1,000 in VAS right now?

Before you consider VAS, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and VAS wasn’t one of them.

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*Returns as of January 13th 2022

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Motley Fool contributor Sebastian Bowen has positions in Telstra Corporation Limited and Vanguard Australian Shares High Yield Etf. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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