Treasury Yields Hit a 24-Year High This Month. Is Vanguard's High-Dividend ETF Still Worth Buying?
Can a 2.35% yield still compete with a government-backed 5%?
On October 5, the 10-year Treasury yield reached a 24-year high of 5.31%, indicating strong competition for the Vanguard High Dividend Yield ETF (VYM). Despite the yield drop to around 5.1%, a $10,000 investment would generate about $510 per year, backed by the U.S. government. This is significantly higher than the fund's current dividend payout of 2.35%, which yields around $235 annually on $10,000.
The Treasury note provides a fixed interest rate, making it an attractive option for those looking for a reliable income stream without worrying about dividend cuts. Meanwhile, the fund's holdings consist of 593 U.S. stocks with above-average dividends, primarily tilted toward value stocks. Over the long term, the fund has delivered an average annual total return of around 11%, which is higher than the current yield on the 10-year Treasury.
However, this growth has not been consistent, with the fund's payout only rising by less than 1% from 2023 to 2025. For investors seeking income now, the Treasury yield is more appealing, but the fund's potential for dividend growth makes it an attractive option for those willing to invest for the long term.
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