The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between VYM and PFF? And which fund is better?
The expense ratio of VYM is 0.40 percentage points lower than PFF’s (0.06% vs. 0.46%). VYM also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VYM has provided higher returns than PFF over the past ten years.
In this article, we’ll compare VYM vs. PFF. We’ll look at risk metrics and portfolio growth, as well as at their annual returns and holdings. Moreover, I’ll also discuss VYM’s and PFF’s performance, industry exposure, and fund composition and examine how these affect their overall returns.
|Name||Vanguard High Dividend Yield Index Fund ETF Shares||iShares Preferred and Income Securities ETF|
|Category||Large Value||Preferred Stock|
The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) is a Large Value fund that is issued by Vanguard. It currently has 48.5B total assets under management and has yielded an average annual return of 12.20% over the past 10 years. The fund has a dividend yield of 2.79% with an expense ratio of 0.06%.
The iShares Preferred and Income Securities ETF (PFF) is a Preferred Stock fund that is issued by iShares. It currently has 19.8B total assets under management and has yielded an average annual return of 6.90% over the past 10 years. The fund has a dividend yield of 4.47% with an expense ratio of 0.46%.
VYM’s dividend yield is 1.68% lower than that of PFF (2.79% vs. 4.47%). Also, VYM yielded on average 5.30% more per year over the past decade (12.20% vs. 6.90%). The expense ratio of VYM is 0.40 percentage points lower than PFF’s (0.06% vs. 0.46%).
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The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has the most exposure to the Financial Services sector at 22.05%. This is followed by Consumer Defensive and Healthcare at 14.13% and 13.61% respectively. Basic Materials (4.41%), Consumer Cyclical (5.57%), and Communication Services (5.91%) only make up 15.89% of the fund’s total assets.
VYM’s mid-section with moderate exposure is comprised of Energy, Utilities, Technology, Industrials, and Healthcare stocks at 7.12%, 7.27%, 9.77%, 10.14%, and 13.61%.
The iShares Preferred and Income Securities ETF (PFF) has the most exposure to the Utilities sector at 81.81%. This is followed by Industrials and Basic Materials at 10.27% and 3.74% respectively. Financial Services (0.0%), Consumer Defensive (0.0%), and Communication Services (0.0%) only make up 0.00% of the fund’s total assets.
PFF’s mid-section with moderate exposure is comprised of Energy, Technology, Real Estate, Healthcare, and Basic Materials stocks at 0.0%, 0.0%, 0.65%, 3.54%, and 3.74%.
VYM is 22.05% more exposed to the Financial Services sector than PFF (22.05% vs 0.0%). VYM’s exposure to Consumer Defensive and Healthcare stocks is 14.13% higher and 10.07% higher respectively (14.13% vs. 0.0% and 13.61% vs. 3.54%). In total, Basic Materials, Consumer Cyclical, and Communication Services also make up 12.15% more of the fund’s holdings compared to PFF (15.89% vs. 3.74%).
|JPMorgan Chase & Co||3.53%|
|Johnson & Johnson||3.28%|
|The Home Depot Inc||2.59%|
|Procter & Gamble Co||2.48%|
|Bank of America Corp||2.35%|
|Exxon Mobil Corp||2.02%|
|Comcast Corp Class A||1.96%|
|Verizon Communications Inc||1.75%|
|Cisco Systems Inc||1.69%|
VYM’s Top Holdings are JPMorgan Chase & Co, Johnson & Johnson, The Home Depot Inc, Procter & Gamble Co, and Bank of America Corp at 3.53%, 3.28%, 2.59%, 2.48%, and 2.35%.
Exxon Mobil Corp (2.02%), Comcast Corp Class A (1.96%), and Verizon Communications Inc (1.75%) have a slightly smaller but still significant weight. Intel Corp and Cisco Systems Inc are also represented in the VYM’s holdings at 1.71% and 1.69%.
|Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A||2.54%|
|BlackRock Cash Funds Treasury SL Agency||2.3%|
|Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-||1.79%|
|Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L-||1.49%|
|ArcelorMittal S.A. 5.5%||1.36%|
|Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A||1.35%|
|Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B||1.14%|
|NextEra Energy Inc Unit||1.12%|
|Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4||1.08%|
|Avantor Inc Ser A||0.99%|
PFF’s Top Holdings are Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A, BlackRock Cash Funds Treasury SL Agency, Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-, Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L-, and ArcelorMittal S.A. 5.5% at 2.54%, 2.3%, 1.79%, 1.49%, and 1.36%.
Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A (1.35%), Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B (1.14%), and NextEra Energy Inc Unit (1.12%) have a slightly smaller but still significant weight. Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4 and Avantor Inc Ser A are also represented in the PFF’s holdings at 1.08% and 0.99%.
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The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a Beta of 0.88 with a Standard Deviation of 12.69 and a R-squared of 88.88. Its Treynor Ratio is 13.24 while VYM’s Alpha is -0.7. Furthermore, the fund has a Mean Return of 1.04 and a Sharpe Ratio of 0.93.
The iShares Preferred and Income Securities ETF (PFF) has a Alpha of 3.45 with a Treynor Ratio of 6.79 and a Beta of 0.81. Its Mean Return is 0.52 while PFF’s Standard Deviation is 7.87. Furthermore, the fund has a R-squared of 9.39 and a Sharpe Ratio of 0.72.
VYM’s Mean Return is 0.52 points higher than that of PFF and its R-squared is 79.49 points higher. With a Standard Deviation of 12.69, VYM is slightly more volatile than PFF. The Alpha and Beta of VYM are 4.15 points lower and 0.07 points higher than PFF’s Alpha and Beta.
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VYM had its best year in 2013 with an annual return of 30.26%. VYM’s worst year over the past decade yielded -5.87% and occurred in 2018. In most years the Vanguard High Dividend Yield Index Fund ETF Shares provided moderate returns such as in 2012, 2014, and 2010 where annual returns amounted to 12.68%, 13.47%, and 14.17% respectively.
The year 2012 was the strongest year for PFF, returning 18.25% on an annual basis. The poorest year for PFF in the last ten years was 2018, with a yield of -4.77%. Most years the iShares Preferred and Income Securities ETF has given investors modest returns, such as in 2015, 2020, and 2017, when gains were 4.62%, 7.94%, and 8.33% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VYM would have resulted in a final balance of $33,914. This is a profit of $23,914 over 11 years and amounts to a compound annual growth rate (CAGR) of 12.20%.
With a $10,000 investment in PFF, the end total would have been $20,272. This equates to a $10,272 profit over 11 years and a compound annual growth rate (CAGR) of 6.90%.
VYM’s CAGR is 5.30 percentage points higher than that of PFF and as a result, would have yielded $13,642 more on a $10,000 investment. Thus, VYM outperformed PFF by 5.30% annually.
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