One of my favorite ways to invest in stocks is through exchange-traded funds (ETFs) because they simplify the investment process. You won’t have to spend hours researching companies or investing “right”. Instead, you can invest in ETFs and get instant access to many companies at once.
Investing in ETFs doesn’t have to mean sacrificing profits, either. There are many ETFs that have delivered market-beating returns and made investors a lot of money.
A single Vanguard ETF can turn a $500 monthly investment into more than $680,000. And that could mean about $20,500 in annual dividends. Talk about a win-win.
Image source: Getty Images.
The Vanguard ETF I’m talking about is Vanguard High Dividend Yield ETF(NYSEMKT: VYM). As its name suggests, it’s a dividend-oriented ETF that could be a great income investment. It reflects FTSE High Dividend Yield Indexwhich focuses mainly on large-cap companies with above-average dividend yields (including a few non-large-cap companies).
This criterion means that VYM has many well-established companies with strong cash flow, consistent dividend history and longevity. Below are the top 10 ETF stocks:
Company
ETF percentage
Broadcom
6.69%
JPMorgan Chase & Co.
4.08%
ExxonMobil.
2.41%
Johnson & Johnson
2.08%
Walmart
2.06%
Home Depot
1.97%
AbbVie
1.82%
Procter & Gamble
1.80%
Bank of America
1.70%
Chevron
1.50%
Data source: Vanguard. Interest on 31 August
Unlike S&P 500 (SNPINDEX: ^GSPC) or other growth ETFs, the dividend focus means it’s not as tech-heavy as other indexes and ETFs. The tech sector makes up about 33% of the S&P 500, which is only about 12% of the VYM, which means it can be a good way to hedge against bearish periods in the sector or overvalued tech stocks due for a correction.
Since different companies pay dividends at different times, the size of VYM’s quarterly dividends fluctuates. The last four payouts per share were $0.8417 (September 2025), $0.8617 (June 2025), $0.85 (March 2025) and $0.9642 (December 2024). One thing you can count on, however, is VYM’s dividend, which increases over time.
Since its inception, the payout has increased more than 380 percent, far more than the S&P 500’s dividend payout has increased over that period.
VYM Dividend data according to YCharts
An above-average dividend is nice, but an above-average dividend that grows steadily over time can be an added bonus.
Over the past decade, VYM has averaged an annual return of 11.2%. Past performance is no guarantee of future performance, but assuming an average annual return of around 11%, below shows how much a $500 monthly investment could grow over time, assuming dividends are reinvested.
Year
Investments in total
10
$100,300
15
$206,400
20
$385,200
25
$686,400
30
1.19 million
Author’s calculations via Investor.gov. Amounts are rounded to the nearest hundred.
Ideally, the investment would increase by more than 1.19 million over 30 years. $, but for the sake of this illustration, let’s say you have 25 years and your investment will grow to about $686,000 at VYM’s 0.06% expense ratio. VYM’s average dividend yield over the past decade is 3%. With $686,000 invested in the ETF, a 3% dividend yield would pay $20,580 annually.
Nothing is guaranteed in the stock market and we can’t predict stock price movements, but it does show the power of time and compounding in investing, especially when it comes to dividends. Time and patience can literally pay off.
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Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Stefon Walters has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Chevron, Home Depot, JPMorgan Chase, Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF and Walmart. The Motley Fool recommends Broadcom and Johnson & Johnson. The Motley Fool has a disclosure policy.
1 Vanguard ETF Could Turn $500 a Month into a $686,000 Portfolio That Pays $20,500 in Annual Dividends, originally published by The Motley Fool
