There's no question that the yields on some ASX dividend stocks have been shrinking over the past 12 months or so. This has been particularly evident with the market at new all-time highs this week.
If we look at the yields on many popular ASX dividend stocks, things aren't looking too impressive right now. Take Commonwealth Bank of Australia (ASX: CBA). Far from the 4-6% yields that ASX bank shares have traditionally offered, buying CBA shares today will get you a trailing yield of just 2.9%.
Wesfarmers Ltd (ASX: WES) isn't much better. This industrial and retailing conglomerate hasn't traded at today's current yield of 2.58% in years.
Similarly, it wasn't too long ago that Coles Group Ltd (ASX: COL) shares were offering a dividend yield well north of 4%. But today, those same Coles shares are being priced with a yield of 3.49%.
However, income investors need not despair. There are still investments to be found on the ASX (and outside the volatile mining sector) that offer heftier yields than the ones being served up by the shares above.
One such investment is the Vanguard Australian Shares High Yield ETF (ASX: VHY).
This exchange-traded fund (ETF) has long been a popular option for income investors. The Vanguard Australian Shares High Yield ETF represents a portfolio of around 70 ASX dividend stocks, which are all selected on their income potential.
You'll find venerable income-paying companies ranging from Telstra Group Ltd (ASX: TLS) and Macquarie Group Ltd (ASX: MQG) to Transurban Group (ASX: TCL) and Westpac Banking Corp (ASX: WBC) in its current portfolio.
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An ASX dividend stock with a huge yield
Because VHY is an ETF with so many diverse holdings, the level of dividend income it can offer investors can vary from year to year. However, I think this ETF's recent performance highlights its potential as a high-yield investment.
This ETF pays out dividend distributions every quarter rather than the usual six-month interval that is common on the ASX.
Over the past 12 months, VHHY investors have enjoyed a total of $4.40 in dividend distributions per unit. That means this ETF is currently trading on a trailing dividend yield of 5.78%, given the current (at the time of writing) unit price of $76.06.
If VHY keeps its payouts steady, this means that an investor can put $15,000 into this ETF and potentially receive $867 in annual dividend income.
Now, as with any ASX dividend stock, this is not a done deal. VHY could well pay out more than $4.40 per unit in dividend income in 2025. But it could also pay less. After all, the 12 months prior to January 2024 saw this ETF dole out just $3.26 per unit in income.
Despite this, I believe that the Vanguard Australian Shares High Yield ETF will always be one of the highest-yielding ASX dividend stocks on our share market, thanks to its tendency to capture income from the market's highest-paying shares.
As such, I think this is an investment that any income investor should at least consider today.
