When it comes to ASX exchange-traded funds (ETFs), few could rival the popular Vanguard Australian Shares Index ETF (ASX: VAS) when it comes to 2022 dividend income.
The ASX is home to dozens, if not hundreds, of dividend-paying shares. Those include everything from the income-heavy big banks to BHP Group Ltd (ASX: BHP), Telstra Group Ltd (ASX: TLS), Woolworths Group Ltd (ASX: WOW) and Harvey Norman Holdings Ltd (ASX: HVN).
The Vanguard Australian Shares ETF holds all of these companies and hundreds more.
And, like most ASX index funds, the VAS ETF pays out quarterly dividend distributions. And since this fund tracks the 300 largest companies that are listed on the ASX, these dividend distributions represent what could be considered a broad average of the income potential of the entire ASX share market.
What are the Vanguard Australian Shares ETF's dividends like?
Over 2022, investors received four distributions from their VAS units:
- The March quarter's 199.59 cents per share distribution
- The June quarter's 215.95 cents per share distribution
- The September quarter's 145.06 cents per share distribution
- The December quarter's 74.97 cents per share distribution
Together, these four dividend distributions add up to an approximate total of $6.36 in income per VAS unit. That would give this ETF a trailing yield of 7.06% on today's pricing.
However, this is not the case. The Vanguard Australian Shares ETF has already paid out one dividend distribution in 2023. That would be the payment investors bagged in April, covering the three months to 31 March 2023.
This payment came in at 57.7 cents per unit. Now, that is a rather massive fall over 2022's corresponding payment of 199.59 cents per unit. It drags VAS' trailing annual distributions down from $6.36 to $4.94.
Thus, right now we have a trailing yield of 5.48% for the Vanguard Australian Shares ETF, instead of 7.06%.
So why has the VAS dividend yield collapsed in 2023?
Why has the latest VAS dividend been a disappointment?
Well, as we discussed earlier, the dividends that the Vanguard Australian Shares ETF is able to pay out to its investors are directly dependent on the dividends the fund itself receives.
The largest share in the S&P/ASX 300 Index (ASX: XKO) right now is BHP Group Ltd (ASX: BHP) with more than a 10% weighting in the index.
In 2022, BHP doled out a record interim dividend of $2.08 per share, thanks to booming commodity prices. But its interim dividend for 2023 came in at just $1.36 per share. We've seen a similar pattern with the dividends from Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG).
Given BHP's dominance of the ASX 300 Index (and as such, VAS's own portfolio), as well as the significant presence of Rio and Fortescue, this is probably what is to blame for this drop in dividend income from the Vanguard Australian Shares ETF.
This first quarter of the year is crowded with resources shares in terms of dividend payments. Many other ASX dividend heavyweights, such as Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB), typically pay out their dividends in May and November. So although the dividends from these shares have increased lately, these haven't shown up in VAS's latest dividend distribution.
Thus, it is possible that we won't see such a dramatic drop in the dividend distributions that the Vanguard Australian Shares ETF will fork out over the rest of the year as we have over the March quarter. So VAS investors – don't panic just yet. But you can probably blame BHP, Rio and Fortescue for April's less-than-impressive quarterly payment.
