Better High-Yield Dividend ETF: VYM vs. SPYD
The Vanguard High Dividend Yield ETF (NYSEMKT: VYM) and the State Street SPDR Portfolio S 500 High Dividend ETF (NYSEMKT: SPYD) are two of the largest dividend exchange-traded funds (ETFs) with pure high-yield strategies. This is to say they select stocks for the portfolio based on dividend yield and nothing else.
There are positives and negatives to this approach. If you're an income investor and simply looking to maximize the dividends you receive from your investments, this would be the way to do it with a diversified equity fund. Yields of 4% to 5% using this strategy are regularly achievable.
On the flip side, if you're selecting stocks this way, you leave yourself vulnerable to yield traps. Those are stocks whose yields are artificially high due to a falling share price, and that could face a dividend cut in the future. In other words, stocks that may be in poor financial health.
Source Fool.com
