I’d buy this high-yield ASX ETF over the Vanguard Australian Shares Index ETF (VAS)

The Vanguard Australian Shares Index ETF (ASX: VAS) is one of the most popular ASX-listed exchange-traded funds (ETFs), giving investors exposure to Australia’s blue-chips along with the solid dividend yield. But, it’s not the first ASX ETF I’d pick for passive income.

There are plenty of quality businesses inside the S&P/ASX 300 Index (ASX: XKO), but the biggest positions are mostly ASX mining shares and ASX bank shares. Those businesses are known for their good dividend yields, but not necessarily for delivering strong compounding earnings growth.

For multiple reasons, I’d choose WCM Quality Global Growth Fund (ASX: WCMQ), a fund that invests in international shares. Let’s get into why I think it’s a more appealing option than the VAS ETF.

Better distribution yield

On the passive income side, the WCMQ ETF actually offers a higher level of dividends.

The WCMQ ETF targets a distribution yield of at least 5% each year, which I’d describe as a solid starting point, with growth potential from there.  

The VAS ETF currently has a distribution yield of 3.3%. The VAS ETF yield is still less than 5%, even when franking credits are included.

Due to the strength of the long-term returns of the WCMQ ETF, I’m expecting its distribution to grow at a faster pace than the VAS ETF.

Stronger net returns

As investors, the main thing we want from an investment is returns. The WCMQ ETF has delivered great returns thanks to its investment style of hunting for businesses with expanding economic moats (strengthening competitive advantages).

When a business is pulling further ahead of the competition, it means their ability to generate stronger profits for the foreseeable future has improved. That usually translates into a business being able to achieve stronger profit margins.

Another core element of the WCM investment strategy is that these businesses need to have a corporate culture that is supportive of improving their competitive advantages further.

The WCMQ ETF has returned an average of around 12% per year over the last five years to March 2026, while the VAS ETF has returned an average of 8.5% in the past five years. Past performance is not a guarantee of future returns of course, but I think the ASX ETF’s investment strategy can help it continue to outperform.

Since inception in August 2018, the WCMQ ETF has returned an average of 14%. That’s high enough to pay a good distribution yield and deliver solid capital growth.

Global diversification

The final advantage I’ll highlight that the ASX ETF can provide is a portfolio of global shares, while the VAS ETF only provides exposure to ASX shares.

The WCMQ ETF sources ideas from across the world, with stocks coming from the Americas, Europe and Asia.

I also like that the fund provides exposure to a variety of sectors, which helps reduce the risks and gives it more find good opportunities – it’s not just a tech fund. Its biggest four industry allocations are currently IT, industrials, healthcare and financials.

The post I’d buy this high-yield ASX ETF over the Vanguard Australian Shares Index ETF (VAS) appeared first on The Motley Fool Australia.

More reading

• If I had to build a simple ASX portfolio today, this is what I’d do
• All-weather ASX ETFs to buy if the market crashes 20%
• Is this ASX ETF the perfect companion to Vanguard’s VAS?
• ASX ETF investors exit US stocks in favour of Aussie shares: Betashares
• 2 high-quality ASX ETFs I’d buy for impressive passive income

Motley Fool contributor Tristan Harrison has positions in Wcm Quality Global Growth Fund. 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.