Vanguard VYM Offers Broader Diversification Than NOBL

A comparative analysis of the Vanguard High Dividend Yield ETF (VYM) and ProShares - S&P 500 Dividend Aristocrats ETF (NOBL) reveals VYM's notable outperformance and cost advantage. VYM, with a 0.06% expense ratio and 589 holdings targeting forecasted high dividend yields, delivered a 98.5% total return over five years, significantly surpassing NOBL's 53.1% return, which focuses on S&P 500 dividend growth companies with a 0.35% expense ratio. This disparity underscores the impact of lower fees and a broader investment mandate on long-term returns for income-focused ETFs.

Analysis

The Vanguard High Dividend Yield ETF (VYM) significantly outperformed the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) over the past five years, delivering a 98.5% total return compared to NOBL's 53.1%. This disparity is largely attributable to VYM's substantially lower expense ratio of 0.06% versus NOBL's 0.35%, alongside its broader investment mandate. VYM's fee is less than one-fifth of NOBL's, directly impacting net returns.

VYM tracks a broader index, holding 589 U.S. stocks forecasted to pay above-average dividends, including those outside the S&P 500. Conversely, NOBL employs a narrower, equally weighted approach, focusing on 70 S&P 500 companies that have consistently raised dividends for at least 25 years, prioritizing dividend growth consistency over immediate yield or broader market exposure.

Beyond performance, VYM offers a higher dividend yield of 2.5% compared to NOBL's 2.1% and manages significantly more assets, with $81.3 billion AUM versus NOBL's $11.1 billion. VYM's strategy, which includes a tilt towards Financial Services (22%), Technology (16%), and Healthcare (12%), has demonstrated superior growth and yield characteristics.

This analysis underscores that while both ETFs target income, VYM's combination of broader diversification, lower fees, and a focus on forecasted high dividend yields has translated into superior long-term total returns, closely tracking the S&P 500's 113% return (including dividends) over the same period, while NOBL lagged significantly.

Key Decisions for Investors

• Investors prioritizing total return and cost efficiency in a high-dividend strategy should favor VYM due to its lower expense ratio and historical outperformance.
• Consider VYM for core income-focused portfolios given its broader diversification and higher dividend yield compared to NOBL.
• Evaluate NOBL only if consistent, long-term dividend growth from S&P 500 constituents is a primary, overriding objective, acknowledging its higher fees and lower total return profile.