Forget VYM: HDV’s 3.42% Yield and 8-Point Year-to-Date Lead Deserve a Hard Look

Forget VYM: HDV’s 3.42% Yield and 8-Point Year-to-Date Lead Deserve a Hard Look

Ryne Mauck

Sat, September 12, 2026 at 1:15 AM GMT+3 6 min read

Quick Read

• HDV's 3.42% yield tops VYM's 2.20% by 122 basis points, while HDV also leads VYM by 8 points in year-to-date total return.

• HDV holds Exxon at 8.42% versus VYM's 2.72%, capturing far more of Exxon's nearly 40% year-to-date gain but adding single-name energy risk.

• In taxable accounts, directing new contributions into HDV while leaving existing VYM lots intact avoids triggering capital gains taxes on embedded gains.

• Read More: Learn 7 ways to generate income with a $1,000,000+ portfolio (sponsor)

If you own the Vanguard High Dividend Yield ETF (NYSEARCA:VYM), you own it for a reason: broad exposure to roughly 500 dividend-paying U.S. large caps at a very low fee, wrapped in the Vanguard brand. It has been one of the default income cores for a decade. But VYM has quietly become an average performer among high-dividend ETFs in 2026, held back by a diluted yield and a growing tilt toward large-cap names with below-average dividend payouts. A competing fund from BlackRock has outperformed VYM on both income and price return this year, and it deserves a hard look before your next contribution.

What VYM Delivers, and Where the Design Leaks

VYM tracks the FTSE High Dividend Yield Index, a broad screen that includes any U.S. stock with an above-average forecast yield. The fund charges 0.04% a year, which is genuinely hard to beat on cost alone. The problem is what that wide net actually catches. VYM's largest position is Broadcom at roughly 8% of the portfolio, a semiconductor stock whose dividend yield has been diluted by its large capital appreciation. When your biggest weight yields well under 1%, the fund's headline income shrinks.

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The result: VYM's 30-day SEC yield sits at 2.20% as of August 31, 2026. That is barely above the S&P 500 and thin for a fund investors buy specifically for cash flow. Total return has followed the same pattern. VYM is up 14.38% year-to-date and 18.08% over the past year, respectable numbers dragged down by a portfolio that increasingly looks like a slightly value-tilted S&P 500 rather than a dedicated income vehicle.

Meet HDV: Fewer Names, Bigger Payout, Better Year

The alternative is the iShares Core High Dividend ETF (NYSEARCA:HDV), BlackRock's concentrated screen for high-yielding U.S. equities with wide moats and healthy balance sheets. HDV holds 79 positions instead of hundreds, and it screens Morningstar's economic moat rating and financial-health score before ranking by yield. That produces a portfolio that actually looks like an income fund.

The scorecard, using the same measurement windows for both:

• Yield: HDV's 30-day SEC yield is 3.42% as of July 31, 2026, versus VYM's 2.20%. That is roughly 122 basis points of additional yield per dollar invested, annually.

• Year-to-date total return: HDV +22.51% versus VYM +14.38%, an 8-point lead.

• One-year total return: HDV +24.16% versus VYM +18.08%.

• Five-year total return: HDV +82.81% versus VYM +77.89%.

• Expense ratio: HDV at 0.08%; VYM at 0.04%.

HDV's outperformance stems from its concentration in the sectors that have led 2026: integrated energy, tobacco, healthcare, and consumer staples. Exxon Mobil is the top holding at 8.42% of the fund, joined by Chevron at 6.42%. Exxon alone is up 39.99% year to date, boosted by a $20 billion 2026 share-buyback plan and 43 consecutive years of dividend growth. VYM owns the same names, but at diluted weights: Exxon is just 2.72% of VYM, Chevron 1.51%. The same tailwind, but roughly half the exposure..

Real Tradeoffs You Should Know

HDV comes with real tradeoffs. Over a full decade, VYM wins: +202.63% versus HDV's +157.07%. That gap reflects VYM's larger technology and financials exposure during the 2016 to 2021 growth run. HDV also charges a 4-basis-point higher expense ratio, and its concentration in energy and staples cuts both ways. When oil prices decline, HDV declines with them. And because Exxon and Chevron together are nearly 15% of the fund, single-name risk is real. Investors buying HDV are effectively choosing a portfolio that behaves like a dedicated income fund rather than a diversified equity index with a value tilt.

How to Move Without Creating a Tax Bill

In a tax-advantaged account (IRA, 401(k), HSA), you can swap directly with no tax consequence. In a taxable account, check your cost basis first: VYM held from 2020 or earlier likely carries a large embedded gain, and 15% or 20% long-term capital gains rates can wipe out years of the yield pickup. A cleaner approach is to direct new contributions and reinvested dividends into HDV while leaving existing VYM lots intact, allowing the position to transition organically. If you want the yield boost immediately, splitting the allocation — for example, 60% HDV and 40% VYM — captures most of the income advantage while preserving diversification (we sketched a full plan for turning a mid six-figure balance into $1,500 a month of income in a free report here).

Worth a Second Look Before Your Next Buy

VYM remains a fine, cheap dividend index fund. But if you bought it specifically for income and this year's underperformance stings, HDV offers more of what you wanted: a higher yield, a more concentrated tilt toward companies with proven records of returning cash to shareholders, and, so far in 2026, materially better total return. The extra 4 basis points in fees is a small price to pay for a fund that delivers the income mandate you originally sought.

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If you've saved over $1,000,000, this guide is for you. The last thing you want in retirement is to run out of money, you want your money to generate lasting income while you enjoy your life.

Now you can learn the strategies wealthy retirees use to fund their retirement with The Definitive Guide to Retirement Income from Fisher Investments. Download the guide today! (sponsor)

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