No matter if you are a seasoned investor or just starting out, exchange-traded funds (ETFs) can serve as an excellent addition to your investment portfolio due to their diversification and straightforward nature. Vanguard stands as one of the leading investment firms globally, offering a wide array of cost-effective ETFs such as the Vanguard High Dividend Yield ETF (NYSEMKT: VYM).
Another enticing choice is dividend-generating businesses with established histories of increasing their profits and enhancing dividends over time. The utility firm American Electric Power (NASDAQ: AEP) presents a reliable option, while the oilfield services company Baker Hughes (NASDAQ: BKR) carries more risk, but also offers greater growth prospects.
Discover what sets these income-producing investments apart and makes them worthy of a closer examination.
Image source: Getty Images.
Your budget-friendly pass to investment earnings
Daniel Foelber (Vanguard High Dividend Yield ETF): Boasting $67.9 billion in net assets, the Vanguard High Dividend Yield ETF serves as a substantial yet cost-effective method to secure diversification across high-quality dividend stocks. The fund features an expense ratio of 0.06%, marginally higher than that of funds such as the Vanguard Growth ETF or Vanguard Value ETF, which both sport 0.04% expense ratios. Nonetheless, even if you are investing substantial sums in these funds, the variance is minimal. For instance, a $100,000 investment with a 0.06% expense ratio incurs a mere $60 charge, versus $40 at 0.04%. Vanguard generates revenue by managing trillions of dollars, enabling it to maintain extremely low fees.
The High Dividend Yield ETF holds 451 assets with an average price-to-earnings ratio of just 16.3 and a dividend yield of 2.8%. In contrast, the Vanguard S&P 500 ETF boasts a 26 P/E ratio and a meager 1.3% yield.
To secure a lower multiple and higher yield, the High Dividend Yield ETF sidesteps pricey growth stocks and focuses on the more economical sectors within the stock market. It carries overweight positions in sectors like consumer staples, energy, financials, utilities, and industrials.
While its top holdings do not include popular stocks like Microsoft or Nvidia, they comprise Dividend Kings such as Procter & Gamble and Walmart. In instances where the fund does venture into the technology sector, it opts for a dividend-yielding chip stock like Broadcom. Its leading healthcare stocks are established dividend-paying…
..
