The Vanguard Australian Shares High Yield ETF provides exposure to ASX listed securities expected to deliver higher after tax yields than the market average. Given the lower turnover nature of the Fund it may be most suited to investors seeking a tax effective income stream from their equity investments. VHY is a share class of the Vanguard Australian Shares High Yield Fund (‘the Underlying Fund’).
It is important to note that the Fund’s distributable income is derived from a portfolio of listed assets, and as such, distributions can fluctuate as listed companies are not obligated to maintain a certain level of, nor pay, dividends on a regular basis. This is unlike what is normally associated with traditional income producing assets (for example, fixed interest).
VHY represents an efficient, liquid and cost effective means for investors to gain index exposure to an income focused equity fund. The underlying index that the Fund seeks to replicate offers a broad representation across high yielding ASX listed securities.
Index constituents are drawn from the universe of securities listed on the ASX and which are currently in the FTSE ASFA Australia 200 Index, a broad market index of ordinary and preferred equity securities. The securities are ranked according to each security’s median 12 month forecast dividend yield with companies not forecast to pay dividends in the next 12 months and property trusts being eliminated.
Companies with the highest forecast dividend yield are included in the index until 50% of the float adjusted market capitalisation of the eligible securities is met. No more than 40% of the index can be invested in any one industry, and no more than 10% can be invested in any one company to ensure adequate diversification is achieved.
This ETF suits investors looking for high dividend yields, current Gross 10% yield while at the same to reducing risk to holding one investment through the index style approach.