VYM vs VIG: Comparing Vanguard’s Dividend ETFs

This article compares VYM vs VIG — Vanguard’s High Dividend Yield ETF vs Vanguard Dividend Appreciation Index Fund (VIG).

Both are passively-managed index ETFs popular with dividend investors and retirees looking to earn yields above total market ETFs such as VTI.

The funds are excellent for dollar-cost averaging and compounding interest. Use a broker like M1 Finance to optimize the compounding effect by automating dividend reinvestment. 

Index ETFs track market indexes like the S&P 500. 

VYM and VIG are narrower-scoped ETFs that track specific dividend-focused indexes. Each ETF has fewer stock holdings than the S&P 500. 

VYM tracks the Financial Times Stock Exchange (FTSE, or “Footsie”) High Dividend Yield Index. VIG tracks the S&P U.S. Dividend Growers Index. 

Both funds own shares of the largest U.S. dividend-paying companies and pay quarterly dividends.

Passive index ETF managers do not pick stocks. They allocate funds to all stocks in the benchmark index to track their performance. Managers receive a small fee to achieve this outcome.

Since most actively managed mutual funds do not beat their target benchmarks, prudent fiduciary financial planners recommend index funds and ETFs instead of actively managed funds or individual stocks.

Bottom Line Upfront (BLUF)

Before I get into the details of VYM vs VIG, it’s important to keep the following in mind:

• Both funds are excellent, low-fee options for your portfolio. 
• VYM aims for higher current yields. VIG aims for higher dividend growth (annual appreciation of the dividend payment).
• VIG has outperformed VYM over a ten-year investment horizon (see chart below). Past performance is not indicative of future returns.
• VYM is better diversified, while VIG has more holdings concentration risk. VYM has 50% more holdings than VIG.
• Both ETFs are available to purchase from any online broker. I prefer M1 Finance.
• If you have an account with Vanguard, you can own similar mutual funds (see the mutual funds section).

Retirees and investors seeking current income may prefer VYM for its higher yield today.

Younger investors or those looking for long-term dividend growth, lower taxable income, and higher total returns may choose VIG. 

Please note that both ETFs update their prospectuses regularly. The information referenced in this article will change over time.

The best resource for both funds is the respective company’s websites.

Here are links to the most updated information at Schwab and Vanguard. Consider the information on those pages to be the authoritative data source.

• Vanguard’s High Dividend Yield ETF (VYM)
• Vanguard’s Dividend Appreciation Index ETF (VIG)

VYM vs VIG — Side-by-Side Comparison

Here’s a side-by-side comparison of both ETFs. Scroll right on mobile.

A few noticeable differences comparing VYM vs VIG:

• VIG is larger and older.
• The benchmark indexes are different.
• Both expense ratios are very low — identical at the time of writing.
• VIG’s total return has outperformed VYM over five, and ten-year periods. 
• VYM has more holdings, while VIG has a higher concentration percentage on the top 10 holdings.
• VYM has a higher yield. VIG excludes certain high-yielding eligible stocks (see Benchmark Indexes section for more information).

VYM vs VIG — Benchmark Indexes

VIG tracks the S&P U.S. Dividend Growers Index. 

Visit this page for the latest information about the index.

Stocks must pass the following screens to be eligible for inclusion in the index: 

• Minimum 10 consecutive years of dividend growth
• U.S.-domiciled security with $100+ million market cap
• REITs are ineligible
• The index excludes the top 25% highest-yielding eligible companies from the index

VYM tracks the Financial Times Stock Exchange (FTSE, or “Footsie”) High Dividend Yield Index.

Visit this page for the latest information about the index.

According to the Vanguard VYM Factsheet, the FTSE High Dividend Yield Index is derived from the U.S. components of the FTSE Global Equity Index Series (GEIS).

• Includes stocks with the highest dividend yields.
• Excludes REITs, which generally do not benefit from favorable tax rates on qualified dividends.
• Uses buffer zones during annual rebalancing to reduce portfolio turnover.

VYM vs VIG Chart — Performance

The performance of these two funds tracked similarly for several years but diverged since 2018.

Here is a daily updated VYM vs VIG chart compared against each other over ten years. Scroll right on mobile.

Embed this chart in your website using the following code. Please include the link for attribution:

<p style="text-align: center;"><iframe width="700" height="450" seamless frameborder="0" scrolling="no" src="https://docs.google.com/spreadsheets/d/e/2PACX-1vQxlLr5t8uxzo64OPpd2mLaHwti5rBRi3KcXyD5iyYRJxCxozUODonVIG7IKmx5yqZDpt7sD6Ijg2Zq/pubchart?oid=233418497&amp;format=interactive"></iframe></p> <p style="text-align: center;"><span style="font-size: 10pt;">Source: <a href="https://www.retirebeforedad.com/vym-vs-vig/">RetireBeforeDad.com/vym-vs-vig/</a></span></p>

Past performance is not indicative of future results. 

Though VIG has outperformed VYM over the past ten years, either fund is suitable as an income-producing asset in your portfolio. 

See the table above for up-to-date three, five, and ten-year average annual performance records.

VYM vs VIG — Dividend Payout Schedules

Both VYM and VIG pay quarterly dividends. Review the VIG dividend history and current yield. 

Investors receive quarterly dividend payments in March, June, September, and December for both ETFs.

Learn more: 

• VIG Dividend Payment History
• VYM Dividend Payment History

VYM vs VIG — Top Ten Holdings

Here are the top ten holdings for each index ETF. Visit the links at the beginning of the article for the most updated lists. 

 

Mutual Fund Alternatives

Here are the closest mutual fund alternatives for both ETFs. Only own these mutual funds if you have an existing account with Vanguard. 

• VYM = VHYAX 
• VIG = VDADX 

Each mutual fund equivalent has a $3,000 minimum investment threshold and slightly higher expense ratio (0.08% vs 0.06% at last check)

The VYM twin fund is called the Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX). Investors with an account at Vanguard who prefer mutual funds can consider this fund as an alternative to VYM. 

The VIG twin fund is called the Vanguard Dividend Appreciation Index Fund Admiral Shares (VDADX). Investors with an account at Vanguard who prefer mutual funds can consider this fund as an alternative to VIG. 

Accounts elsewhere should use the VYM or VIG ETFs to get equivalent exposure at lower minimums and expense ratios.

Mutual funds trade differently than ETFs, which trade like stocks. 

ETFs are easier to own, and the price changes throughout the day. Mutual funds only trade at the market close. 

Active investors typically use ETFs for trading purposes or to buy and hold indexes when they can’t access index mutual funds.

For example, if you have an investing account with M1 Finance, you’d invest via ETFs instead of mutual funds. If your account is with Vanguard, you may benefit from using the VHYAX and VDADX index funds.

Mutual funds are more hands-off and automatically reinvest dividends and capital gains. The less frequent trading also appeases the temptation to be more active with an investment. 

• Learn more about VHYAX here 
• Learn more about VDADX here 

Use the above resources to find the most up-to-date information regarding VHYAX vs VDADX.

Fidelity Alternatives

If you have a Fidelity account and prefer their funds, there are limited options for similar ETFs or mutual funds.

Here they are :

• Fidelity High Dividend ETF (FDVV)
• Fidelity Strategic Dividend & Income Fund (FSDIX)
• Fidelity Dividend Growth Fund (FDGFX)

What is the Best Broker to Buy VYM or VIG?

Here are my favorite online brokers for investing in ETFs and automatically reinvesting dividends. 

Vanguard and Fidelity are excellent choices for long-term retirement investors. You’re in good hands if your IRA or employer-sponsored plan is with either broker.

I recommend another broker for a more modern user experience that can also serve your banking, borrowing, and spending needs. 

Long-term investors may prefer an online broker better for dollar cost averaging and dividend reinvestment. 

I’m a big fan of the online brokerage M1 Finance. M1 Finance is a reliable, robust, no-fee online broker for beginner and intermediate investors. It’s easy to get started.

As your investing skills and portfolio mature, M1 is one of the best platforms to scale.

They also offer an integrated checking account and low borrowing rates. Read my complete M1 Finance review here. 

M1 Finance does not offer mutual funds. However, ETFs are plentiful. It’s my favorite online broker for everyday investing. 

The platform is more intuitive than old-school brokers because it’s built on a modern technology platform.

You create portfolio “pies” that contain all the stocks and ETFs you want to own and in what percentages. Simply add an ETF to a pie and add funds to your account. 

Learn More about M1 Finance

Conclusion

Deciding between VYM and VIG comes down to current income or long-term dividend growth.

VIG has outperformed VYM over the past 10 years. However, VYM has a higher yield today.

Retirees looking for current income should go with VYM.

Younger investors looking for some income, lower taxation in taxable accounts, and higher long-term total return may prefer VIG. 

Purchase either ETF at any commission-free online broker. 

Please comment with your questions regarding VYM vs VIG in the comments section below. Include any requests you have about adding more detail to this article. 

Read more:

• SCHD vs VYM
• VIG vs SCHD

Disclosure: The author does not own either ETF. The opinions expressed are solely those of the authors and do not reflect the views of M1. They are for informational purposes only and are not a recommendation of an investment strategy or to buy or sell any security in any account. They are also not research reports and are not intended to serve as the basis for any investment decision. Prior to making any investment decision, you are encouraged to consult your personal investment, legal, and tax advisors.