If I wanted to buff out my ASX share portfolio's dividend income potential today, there would be one ASX 200 share I would be drawn to as a first stop.
Well, this ASX 200 share isn't really an ASX 200 share. Rather, it's an exchange-traded fund (ETF) that holds a basket of ASX 200 shares within it.
It is none other than the Vanguard Australian Shares High Yield ETF (ASX: VHY). I think this ETF would make for a perfect investment for anyone chasing franked dividend income today.
The Vanguard Australian Shares High Yield ETF isn't an index fund in the way its cousin, the popular Vanguard Australian Shares Index ETF (ASX: VAS) is. Instead of tracking the entire ASX, VHY holds a relatively concentrated portfolio of around 70 dividend shares. Most of those are ASX 200 shares, selected based on both their current and future income potential.
You'll find everything from Commonwealth Bank of Australia (ASX: CBA) and BHP Group Ltd (ASX: BHP) to Telstra Group Ltd (ASX: TLS) and Super Retail Group Ltd (ASX: SUL) here. National Australia Bank Ltd (ASX: NAB) to Woodside Energy Group Ltd (ASX: WDS). Wesfarmers Ltd (ASX: WES) to Medibank Private Ltd (ASX: MPL).
Like any ETF, VHY is obliged to pass on any dividend income its underlying holdings produce. That means that anyone who owns VHY shares is entitled to a proportionate share of this income. This diversity, built upon those 70 different holdings, makes this an ideal investment if you want an easy, broad-based income investment. In my view, anyway.
But exactly how much income can one expect from an investment in the Vanguard Australian Shares High Yield ETF?
An ETF full of ASX 200 shares that pays quarterly dividends
Well, this ETF pays out quarterly dividend distributions, an uncommon characteristic of the ASX. Over the past 12 months, this pattern has continued, with VHY units forking out a total of $4.24 in dividend income.
Now, ASX shares don't usually pay out the same level of dividend income every year. As such, like all ASX 200 shares, we can't assume those payouts will continue over the coming 12 months and beyond.
Even so, I'd be happy to accept this deal. This ETF will pay out whatever the highest-yielding ASX 200 shares are paying out. So, chances are you'll always be getting an above-average dividend yield from this ETF.
But let's return to the $4.24 in dividends per share. At the current VHY unit price of $72.75 (at the time of writing), this 12-month total gives this ETF a trailing yield of 5.83%.
That means if one buys 600 units of this ETF today, which would set one back around $43,650, one could potentially secure an annual stream of passive dividend income of $2,544. That would work out to be worth $212 every month.
Now, obviously, $43,650 is no small chunk of change. But I think it's an achievable goal over a few years of investing. Especially if you reinvest those fat dividend distributions for your first few years.
Pulling all of this together, you can see why I would recommend this ETF full of ASX 200 dividend shares to anyone looking to boost their incomes today.
