VYM vs. XLC: What’s The Difference?

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) and the Communication Services Select Sector SPDR Fund (XLC) are both among the Top 100 ETFs. VYM is a Vanguard Large Value fund and XLC is a SPDR State Street Global Advisors Communications fund. So, what’s the difference between VYM and XLC? And which fund is better?

The expense ratio of VYM is 0.06 percentage points lower than XLC’s (0.06% vs. 0.12%). VYM also has a higher exposure to the financial services sector and a higher standard deviation. Overall, VYM has provided lower returns than XLC over the past ten years.

In this article, we’ll compare VYM vs. XLC. We’ll look at portfolio growth and fund composition, as well as at their annual returns and performance. Moreover, I’ll also discuss VYM’s and XLC’s risk metrics, holdings, and industry exposure and examine how these affect their overall returns.

Summary

VYM XLC
Name Vanguard High Dividend Yield Index Fund ETF Shares Communication Services Select Sector SPDR Fund
Category Large Value Communications
Issuer Vanguard SPDR State Street Global Advisors
AUM 48.5B 14.09B
Avg. Return 12.20% 29.04%
Div. Yield 2.79% 0.62%
Expense Ratio 0.06% 0.12%

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 Communication Services Select Sector SPDR Fund (XLC) is a Communications fund that is issued by SPDR State Street Global Advisors. It currently has 14.09B total assets under management and has yielded an average annual return of 29.04% over the past 10 years. The fund has a dividend yield of 0.62% with an expense ratio of 0.12%.

VYM’s dividend yield is 2.17% higher than that of XLC (2.79% vs. 0.62%). Also, VYM yielded on average 16.84% less per year over the past decade (12.20% vs. 29.04%). The expense ratio of VYM is 0.06 percentage points lower than XLC’s (0.06% vs. 0.12%).

Fund Composition

Industry Exposure

VYM vs. XLC - Industry Exposure

VYM XLC
Technology 9.77% 0.0%
Industrials 10.14% 0.0%
Energy 7.12% 0.0%
Communication Services 5.91% 100.0%
Utilities 7.27% 0.0%
Healthcare 13.61% 0.0%
Consumer Defensive 14.13% 0.0%
Real Estate 0.02% 0.0%
Financial Services 22.05% 0.0%
Consumer Cyclical 5.57% 0.0%
Basic Materials 4.41% 0.0%

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 Communication Services Select Sector SPDR Fund (XLC) has the most exposure to the Communication Services sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLC’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

VYM is 22.05% more exposed to the Financial Services sector than XLC (22.05% vs 0.0%). VYM’s exposure to Consumer Defensive and Healthcare stocks is 14.13% higher and 13.61% higher respectively (14.13% vs. 0.0% and 13.61% vs. 0.0%). In total, Basic Materials, Consumer Cyclical, and Communication Services also make up 84.11% less of the fund’s holdings compared to XLC (15.89% vs. 100.00%).

Holdings

VYM - Holdings

VYM Holdings Weight
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%
Intel Corp 1.71%
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%.

XLC - Holdings

XLC Holdings Weight
Facebook Inc A 23.75%
Alphabet Inc A 11.49%
Alphabet Inc Class C 11.16%
Netflix Inc 4.78%
Charter Communications Inc A 4.65%
Comcast Corp Class A 4.44%
T-Mobile US Inc 4.41%
The Walt Disney Co 4.39%
AT&T Inc 4.35%
Verizon Communications Inc 4.33%

XLC’s Top Holdings are Facebook Inc A, Alphabet Inc A, Alphabet Inc Class C, Netflix Inc, and Charter Communications Inc A at 23.75%, 11.49%, 11.16%, 4.78%, and 4.65%.

Comcast Corp Class A (4.44%), T-Mobile US Inc (4.41%), and The Walt Disney Co (4.39%) have a slightly smaller but still significant weight. AT&T Inc and Verizon Communications Inc are also represented in the XLC’s holdings at 4.35% and 4.33%.

Risk Analysis

VYM XLC
Mean Return 1.04 0
R-squared 88.88 0
Std. Deviation 12.69 0
Alpha -0.7 0
Beta 0.88 0
Sharpe Ratio 0.93 0
Treynor Ratio 13.24 0

The Vanguard High Dividend Yield Index Fund ETF Shares (VYM) has a R-squared of 88.88 with a Alpha of -0.7 and a Treynor Ratio of 13.24. Its Beta is 0.88 while VYM’s Mean Return is 1.04. Furthermore, the fund has a Sharpe Ratio of 0.93 and a Standard Deviation of 12.69.

The Communication Services Select Sector SPDR Fund (XLC) has a R-squared of 0 with a Beta of 0 and a Alpha of 0. Its Mean Return is 0 while XLC’s Sharpe Ratio is 0. Furthermore, the fund has a Treynor Ratio of 0 and a Standard Deviation of 0.

VYM’s Mean Return is 1.04 points higher than that of XLC and its R-squared is 88.88 points higher. With a Standard Deviation of 12.69, VYM is slightly more volatile than XLC. The Alpha and Beta of VYM are 0.70 points lower and 0.88 points higher than XLC’s Alpha and Beta.

Performance

Annual Returns

VYM vs. XLC - Annual Returns

Year VYM XLC
2020 1.14% 26.85%
2019 24.2% 31.22%
2018 -5.87% 0.0%
2017 16.42% 0.0%
2016 16.87% 0.0%
2015 0.33% 0.0%
2014 13.47% 0.0%
2013 30.26% 0.0%
2012 12.68% 0.0%
2011 10.5% 0.0%
2010 14.17% 0.0%

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 2019 was the strongest year for XLC, returning 31.22% on an annual basis. The poorest year for XLC in the last ten years was 2018, with a yield of 0.0%. Most years the Communication Services Select Sector SPDR Fund has given investors modest returns, such as in 2014, 2013, and 2012, when gains were 0.0%, 0.0%, and 0.0% respectively.

Portfolio Growth

VYM vs. XLC - Portfolio Growth

Fund Initial Balance Final Balance CAGR
VYM $10,000 $12,561 12.20%
XLC $10,000 $16,645 29.04%

A $10,000 investment in VYM would have resulted in a final balance of $12,561. This is a profit of $2,561 over 2 years and amounts to a compound annual growth rate (CAGR) of 12.20%.

With a $10,000 investment in XLC, the end total would have been $16,645. This equates to a $6,645 profit over 2 years and a compound annual growth rate (CAGR) of 29.04%.

VYM’s CAGR is 16.84 percentage points lower than that of XLC and as a result, would have yielded $4,084 less on a $10,000 investment. Thus, VYM performed worse than XLC by 16.84% annually.


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