The Vanguard Australian Shares High Yield ETF (ASX: VHY) is a solid option for dividend income due to its focus on higher-yielding ASX shares.
The ASX is known for paying pleasing dividends because many of its largest businesses have both relatively high dividend payout ratios and fairly low price/earnings (P/E) ratios compared to other share markets.
VHY ETF aims to invest in ASX shares with higher forecast dividends than other ASX shares. Stock diversification is achieved by restricting the proportion invested in any one industry to 40% of the total in the exchange-traded fund (ETF) and 10% in any one company.
Australian real estate investment trusts (A-REITs) are also excluded from the index.
Let's look at how big the VHY ETF dividend income could be, what it's invested in and what it would take for $12,000 of annual income or $1,000 of monthly income.
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Large dividend yield
Every month, Vanguard reports the ASX ETF's dividend yield to investors.
I like how it tells investors about the forecast dividend yield. The forecasts are sourced from FactSet, and the ETF's overall yield is based on the yield of each share and weighted in the portfolio based on its market value.
In other words, the dividend yields of the biggest businesses play the largest role in deciding the overall yield of the Vanguard Australian Shares High Yield ETF.
According to Vanguard, the VHY ETF forecast dividend yield is 4.3%. Including franking credits, the fund's forecast yield is 5.8% when grossed up.
It's not the highest yield on the ASX, but I think it's a very solid offering, given there are 90 businesses in the portfolio.
What are the biggest positions in the VHY ETF portfolio?
The VHY ETF is dominated by ASX bank shares and ASX mining shares.
At the end of September 2026, the top 10 holdings of the ASX ETF made up 61.6% of the total ETF.
The VHY ETF's largest holdings include BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ), Rio Tinto Ltd (ASX: RIO), Woodside Energy Group Ltd (ASX: WDS) and Telstra Group Ltd (ASX: TLS).
Each of the above ASX blue-chip shares has a solid dividend yield, contributing to the VHY ETF's overall dividend yield.
Solid performance by the VHY ETF
The Vanguard Australian Shares High Yield ETF has delivered impressive overall returns. In the past decade, it has returned an average of 10.2% – that's the combined return of capital growth and distribution income together by the fund.
Since its inception in May 2011, the VHY ETF has returned an average of 9.76% per year.
How many Vanguard Australian Shares High Yield ETF units for $12,000 income?
Receiving $12,000 annually, or $1,000 each month, sounds great to me. The VHY ETF is a solid candidate to do that because it offers significant diversification with close to 100 holdings.
How many units it would take depends on whether we include franking credits in the income goal.
Without franking credits, an investor would need approximately 3,293 VHY units. If we include the franking credits, an investor would need 2,441 units of the Vanguard Australian Shares High Yield ETF.
Overall, I think it's a solid option with a good dividend yield, though I prefer other dividend options even more.
