The Vanguard Australian Shares High Yield ETF (ASX: VHY) provides a way of investing in ASX dividend shares without having to handpick them yourself.
The VHY ETF tracks the FTSE Australia High Dividend Yield Index before fees.
According to Vanguard, this ASX ETF provides exposure to stocks that have higher forecast dividends relative to their ASX peers.
Vanguard says it's suitable for income investors who also want long-term capital growth.
The ETF has a few rules to ensure diversification.
One of them is not investing more than 40% of funds in any one industry.
It also will not invest more than 10% of funds in any one company.
Which stocks does the VHY ETF hold?
The VHY ETF holds 68 ASX stocks incorporating all market sectors bar healthcare and real estate investment trusts (REITs).
More than 70% of its holdings are large-cap shares because mature, established companies tend to pay higher dividends.
Given its focus on income, its largest holdings are in financials, materials, and energy shares.
A very small portion of the portfolio is in technology.
The ETF's top 10 shares by weight are BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corporation (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Telstra Group Ltd (ASX: TLS), Woodside Energy Group Ltd (ASX: WDS), Rio Tinto Ltd (ASX: RIO), Transurban Group (ASX: TCL), Australia and New Zealand Banking Group Ltd (ASX: ANZ), and Macquarie Group Ltd (ASX: MQG).
According to April data from ASX, the VHY ETF has $4,627 million in funds under management (FUM).
So, what is your portfolio worth now?
The VHY ETF is trading at $73.71 on Thursday, up 0.29%.
On 15 May last year, the VHY closed at $72.30 apiece.
If you had put $10,000 into the VHY ETF on 15 May last year, it would have bought you 138 units (for $9,977.40).
There's been a capital gain of $1.41 per unit since then, which equates to $194.58 for your portfolio of 138 units.
Therefore, your portfolio of VHY ETF units is now worth $10,171.98.
That's not much capital growth — just 1.95% in a year. But capital growth is not your primary focus. It's income.
So, what about dividends (or distributions, as they are called with ETFs)?
Since 15 May 2024, VHY has paid four lots of dividends.
The VHY ETF paid investors 114.351897 cents per unit on 16 July last year. The ETF then paid 104.068751 cents per unit on 16 October.
VHY investors also received 103.600872 cents per unit on 17 January this year and 243.475139 AU cents per unit on 16 April.
Altogether, that is 595.496659 cents per unit, which totals $780.38 in annual income from your 138 VHY ETF units.
Total returns…
Your capital gain of $194.58 plus your distributions of $780.38 gives you a total return in dollar terms of $974.96.
You invested $9,977.40 buying your 138 units of VHY on 15 May.
This means you have received a total return, in percentage terms, of 9.77%.
