Is the Vanguard Australian Shares High Yield ETF (ASX: VHY) a good buy for passive income from ASX dividend shares?
You'd think so. After all, this exchange-traded fund (ETF) offers investors a 'high yield' in its very name. But appearances can sometimes be deceiving. So let's break down the Vanguard High Yield ETF and see if it puts its money where its name is.
So this ETF from provider Vanguard aims to provide investors with a high level of income by holding ASX shares that pay fat and often fully franked dividend payments.
If an ETF holds a dividend-paying share in its underlying portfolio, it is required to pass on any dividend income it receives straight to its investors. These payments are called distributions.
The Vanguard High Yield ETF currently has 73 ASX dividend shares in its underlying portfolio. These, according to the provider, are selected based on their "higher dividend forecasts relative to other ASX-listed companies". The fund takes into account future dividend potential, as well as a company's present dividend prowess.
On the latest data, some of this ETF's top holdings include BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), Woodside Energy Group Ltd (ASX: WDS), Wesfarmers Ltd (ASX: WES), and Westpac Banking Corp (ASX: WBC).
But let's get down to the meat and potatoes.
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What kind of dividends does the Vanguard High Yield ETF offer?
So the Vanguard High yield ETF pays out quarterly dividend distributions. This is a little unusual in itself since most ASX shares pay out a dividend every six months. So no doubt some investors will appreciate the more frequent payment schedule.
This ETF's last four dividend distributions came to an annual total of $4.15 in distributions per unit. At the current Vanguard High Yield ETF unit price of $68.94 (at the time of writing), this gives the fund a trailing yield of 6.02%.
For an investor seeking passive income from ASX dividend shares, this high yield is a pretty good start. To illustrate, it's a more lucrative yield than what is being offered by any of the ASX big four banks today.
Distributions from this ETF also tend to come very close to fully franked too, which would lift this yield up to approximately 8.5% grossed-up.
The Vanguard Australian Shares High Yield ETF charges a management fee of 0.25% per annum.
