7 Best Vanguard High-Dividend Mutual Funds and ETFs to Buy | Investing

Income investors gravitating toward high-dividend-yield funds may overlook one useful characteristic of the strategy: Dividend yield can double as a basic valuation screen. The calculation is straightforward, with a company’s annualized dividend as the numerator and its share price as the denominator. If the dividend remains unchanged while the share price falls, the dividend yield rises.

That means screening for high dividend yields can help identify potentially undervalued companies. Used as one screening metric rather than a complete investment thesis, dividend yield can quickly narrow a large universe of stocks to companies returning substantial cash to shareholders and trading at favorable valuations. Many dividend mutual funds and exchange-traded funds (ETFs) apply this systematically.

Vanguard offers several passively managed options that track benchmarks using dividend yield, sometimes alongside additional screens, to build diversified portfolios of dividend-paying stocks at relatively low cost. Investors also avoid having to manage, reinvest and keep track of payments from potentially hundreds of individual stocks, instead receiving consolidated fund distributions, typically quarterly and sometimes monthly.

However, the value tilt from a high-dividend fund can lead to extended periods of underperformance when growth stocks lead the market. That was evident over much of the past decade as U.S. technology companies pulled ahead. Many of those companies historically retained more earnings for research and development, acquisitions, and other growth initiatives rather than distributing a large proportion to shareholders, leaving traditional high-dividend strategies relatively underweight in the sector.

Investors should also remember that fund distributions are not free money. On the ex-dividend date, an ETF’s net asset value (NAV) generally declines by approximately the amount of the distribution, all else being equal, reflecting cash leaving the portfolio to pay shareholders.

Taxes are another consideration in taxable accounts. The ultimate tax treatment of a fund’s distributions depends on their composition, which investors can verify using year-end tax documents such as Form 1099-DIV. Qualified dividend income (QDI) is generally preferable because eligible dividends can receive the lower long-term capital gains tax rates rather than being taxed at ordinary income rates.

Here’s a look at seven of the best Vanguard high-dividend mutual funds and ETFs to buy today:

*Adjusted effective yield as of Aug. 31.

Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX)

VHYAX is a passively managed mutual fund available at a 0.08% expense ratio with a $3,000 minimum investment. It tracks the FTSE High Dividend Yield Index, which starts with a broad universe of large-, mid- and small-cap U.S. stocks, and excludes real estate investment trusts (REITs) and companies that have not paid a dividend in the past 12 months or are not forecasted to pay one.

From there, VHYAX ranks eligible stocks by dividend yield and weights the resulting portfolio by market capitalization. The result is a diversified portfolio of about 600 stocks currently paying a 2.2% 30-day SEC yield. The dividend screen also produces a value tilt, with the portfolio trading at about 20.6 times earnings, below the broader U.S. equity market, while maintaining strong quality with an 18.5% return on equity.

Vanguard High Dividend Yield ETF (VYM)

Investors looking to avoid VHYAX’s $3,000 minimum investment may prefer its ETF share class, VYM. It is available at half the cost, with a 0.04% expense ratio, and trades at a market price of roughly $163 per share, making it considerably more accessible, particularly through brokerages offering fractional shares. Its portfolio characteristics and income potential are similar, including an identical 2.2% 30-day SEC yield.

VYM can also be relatively tax efficient in a brokerage account. According to Vanguard, for the 2025 tax year, 100% of VYM’s ordinary dividend and short-term capital gains distributions qualified for reduced federal tax rates as QDI. Over the trailing 10-year period, VYM delivered an 11.6% annualized total return, which Vanguard estimates would have been reduced only to 10.8% after taxes on distributions.

Vanguard Utilities ETF (VPU)

Utilities have historically earned a reputation as “widows and orphans” investments because of their lower volatility and above-average yields. Many operate as regulated monopolies, providing essential services with rates set to allow recovery of their substantial infrastructure investments and a reasonable return on capital. Utilities have traditionally returned a meaningful share of earnings through dividends.

VPU’s portfolio spans 68 electric, water and gas utilities as well as independent power producers. The fund pays a 2.9% 30-day SEC yield after deducting a 0.09% expense ratio. One potential growth tailwind for VPU is rising electricity demand from the artificial intelligence buildout, as power-intensive data centers may require substantial additions to generation and grid capacity.

Vanguard Consumer Staples ETF (VDC)

Consumer staples are another traditionally defensive area of the stock market, with demand for necessities such as food, beverages and household products tending to remain relatively resilient during recessions. Many established staples companies also have slower growth and fewer opportunities to reinvest earnings at high rates, encouraging them to return cash to shareholders through dividends.

VDC provides broad exposure to the sector with a 0.09% expense ratio and currently pays a 2.2% 30-day SEC yield. VDC also provides meaningful exposure to dividend-growth stocks. The ETF currently has 16 holdings in common with the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), whose underlying index requires constituents to have increased their dividends for at least 25 consecutive years.

Vanguard Energy ETF (VDE)

Unlike consumer staples and utilities, energy is a much more cyclical sector, with profitability heavily influenced by swings in oil and natural gas prices. The industry’s boom-and-bust history has encouraged many of its largest companies to maintain stronger balance sheets during good times while returning substantial free cash flow to shareholders through dividends. For energy, Vanguard offers VDE.

VDE charges a 0.09% expense ratio and currently pays a 1.8% 30-day SEC yield. Investors should be aware of concentration risk, however. VDE is market-cap weighted, meaning the industry’s largest companies receive correspondingly large allocations. Two of the Big Oil supermajors, ExxonMobil Holdings Corp. (XOM) and Chevron Corp. (CVX), together account for just over one-third of the portfolio.

Vanguard Real Estate Index Fund Admiral Shares (VGSLX)

REITs tend to pay high yields because they generally must distribute at least 90% of their taxable income to shareholders to maintain their REIT tax status. The sector is also surprisingly diverse, spanning apartments, warehouses, offices, shopping centers, hotels, amusement parks, self-storage facilities, healthcare properties and data centers. Investors can buy a broad basket through VGSLX.

Vanguard does not quote a 30-day SEC yield for VGSLX, instead reporting a 3.3% unadjusted effective yield that can include dividends, capital gains and return of capital. Excluding capital gains and return of capital, that figure falls to 2.7%. Both are estimates because the final tax characterization of distributions cannot be determined until year-end. VGSLX charges a 0.13% expense ratio and has a $3,000 minimum.

Vanguard Real Estate ETF (VNQ)

Investors looking to avoid VGSLX’s $3,000 minimum investment may find VNQ more accessible at a share price of roughly $95, with the same 0.13% expense ratio. Both funds have identical mandates and underlying holdings. The same yield mechanics also apply, with Vanguard reporting an unadjusted effective yield of roughly 3.3%, or 2.7% after excluding estimated capital gains and return of capital.

However, VNQ is considerably less tax-efficient than many conventional dividend ETFs like VYM. According to Vanguard, only 2.3% of its 2025 dividend and net short-term capital gains distributions qualified for reduced federal tax rates as QDI. This is largely unavoidable with REIT funds, so investors allocating to VNQ may wish to prioritize it within a tax-sheltered account like a Roth IRA.