9 Vanguard ETFs Pay Ultrahigh Yields. Here's the Best of the Bunch.
How high is ultrahigh when it comes to yields? You can probably find different answers to this question. The Motley Fool’s view is that any yield that’s at least four times the yield of the SPDR S&P 500 ETF (NYSEMKT: SPY) is great enough to be considered ultrahigh. Since the SPDR S&P 500 ETF’s yield stands at 1.21%, an ultrahigh yield would be 4.84%.
With this definition in mind, most of Vanguard’s 97 exchange-traded funds (ETFs) don’t offer ultrahigh yields. However, nine Vanguard ETFs meet the lofty threshold.
Before I get to the list of Vanguard’s ultrahigh-yielders, there’s something important to point out. None of these Vanguard ETFs pays dividends. Instead, they’re all bond funds. Their yields reflect the interest income generated as a percentage of the ETF’s price.
But yield is yield, whether it comes from stock dividends or bond coupon payments. With that out of the way, here are the Vanguard ETFs with 30-day SEC yields (a metric developed by the U.S. Securities and Exchange Commission) of 4.84% or higher:
|
ETF |
30-Day SEC Yield |
|---|---|
|
Vanguard Emerging Markets Government Bond ETF (NASDAQ: VWOB) |
6.24% |
|
Vanguard Long-Term Corporate Bond ETF (NASDAQ: VCLT) |
5.86% |
|
Vanguard Long-Term Bond ETF (NYSEMKT: BLV) |
5.4% |
|
Vanguard Multi-Sector Income Bond ETF (NYSEMKT: VGMS) |
5.34% |
|
Vanguard Extended Duration Treasury ETF (NYSEMKT: EDV) |
5.25% |
|
Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ: VCIT) |
5.12% |
|
Vanguard Total Corporate Bond ETF (NASDAQ: VTC) |
5.09% |
|
Vanguard Long-Term Treasury ETF (NASDAQ: VGLT) |
4.95% |
|
Vanguard ESG U.S. Corporate Bond ETF (NYSEMKT: VCEB) |
4.93% |
Data source: Vanguard.
While yield is certainly important to income investors, it’s not the only factor to consider before buying an ETF. How do Vanguard’s ultrahigh-yield ETFs compare on other fronts?
One key thing to check out is a fund’s costs. Vanguard is known for its low-cost ETFs. All of the nine ultrahigh-yield funds have relatively low annual expense ratios. However, some are more attractive than others.
|
ETF |
Annual Expense Ratio |
|---|---|
|
Vanguard Emerging Markets Government Bond ETF (NASDAQ: VWOB) |
0.15% |
|
Vanguard Long-Term Corporate Bond ETF (NASDAQ: VCLT) |
0.03% |
|
Vanguard Long-Term Bond ETF (NYSEMKT: BLV) |
0.03% |
|
Vanguard Multi-Sector Income Bond ETF (NYSEMKT: VGMS) |
0.3% |
|
Vanguard Extended Duration Treasury ETF (NYSEMKT: EDV) |
0.05% |
|
Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ: VCIT) |
0.03% |
|
Vanguard Total Corporate Bond ETF (NASDAQ: VTC) |
0.03% |
|
Vanguard Long-Term Treasury ETF (NASDAQ: VGLT) |
0.03% |
|
Vanguard ESG U.S. Corporate Bond ETF (NYSEMKT: VCEB) |
0.12% |
Data source: Vanguard.
Another important consideration is long-term performance. A few of these Vanguard ETFs have delivered greater returns since their inception.
|
ETF |
Average Annual Return Since Inception |
|---|---|
|
Vanguard Emerging Markets Government Bond ETF (NASDAQ: VWOB) |
3.21% |
|
Vanguard Long-Term Corporate Bond ETF (NASDAQ: VCLT) |
4.63% |
|
Vanguard Long-Term Bond ETF (NYSEMKT: BLV) |
4.23% |
|
Vanguard Multi-Sector Income Bond ETF (NYSEMKT: VGMS) |
2.06% |
|
Vanguard Extended Duration Treasury ETF (NYSEMKT: EDV) |
2.74% |
|
Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ: VCIT) |
4.3% |
|
Vanguard Total Corporate Bond ETF (NASDAQ: VTC) |
2.18% |
|
Vanguard Long-Term Treasury ETF (NASDAQ: VGLT) |
2.53% |
|
Vanguard ESG U.S. Corporate Bond ETF (NYSEMKT: VCEB) |
(0.38%) |
Data source: Vanguard.
Safety is also of paramount importance to income investors. Vanguard assigns risk/reward ratings between one and five to all of its funds. A higher score indicates less risk, while a lower score reflects greater risk. Here’s how the ultrahigh-yielders stack up:
|
ETF |
Risk/Reward Rating |
|---|---|
|
Vanguard Emerging Markets Government Bond ETF (NASDAQ: VWOB) |
3 |
|
Vanguard Long-Term Corporate Bond ETF (NASDAQ: VCLT) |
3 |
|
Vanguard Long-Term Bond ETF (NYSEMKT: BLV) |
3 |
|
Vanguard Multi-Sector Income Bond ETF (NYSEMKT: VGMS) |
3 |
|
Vanguard Extended Duration Treasury ETF (NYSEMKT: EDV) |
5 |
|
Vanguard Intermediate-Term Corporate Bond ETF (NASDAQ: VCIT) |
2 |
|
Vanguard Total Corporate Bond ETF (NASDAQ: VTC) |
2 |
|
Vanguard Long-Term Treasury ETF (NASDAQ: VGLT) |
3 |
|
Vanguard ESG U.S. Corporate Bond ETF (NYSEMKT: VCEB) |
2 |
Data source: Vanguard.
Which of these ultrahigh-yield Vanguard ETFs is the best pick? It depends on what you prioritize the most. An investor primarily concerned about safety will probably prefer the Vanguard Extended Duration Treasury ETF, which owns long-duration U.S. Treasury bonds. On the other hand, if yield is your most important concern, the Vanguard Emerging Markets Government Bond ETF is the easy choice.
I think, though, that the best of the bunch overall is the Vanguard Long-Term Corporate Bond ETF. This fund primarily invests in long-term corporate bonds. It currently owns 2,451 bonds. This Vanguard ETF ranks second in yield. It ties for the lowest annual expense ratio. The ETF has delivered the best total return among the ultrahigh-yielders since inception. And while it’s not the least risky of the funds, it isn’t the most risky either.
Again, the best pick for you could be different. But the Vanguard Long-Term Corporate Bond ETF should be attractive to many income investors.
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9 Vanguard ETFs Pay Ultrahigh Yields. Here’s the Best of the Bunch. was originally published by The Motley Fool