It has been an interesting 12 months for the stock market.
Income-focused stocks, particularly banks and miners, have done much of the heavy lifting. At the same time, many growth names and technology stocks have struggled, with sentiment dampened by valuation concerns and uncertainty around AI disruption.
This change in leadership has had a marked impact on the performance of various strategies.
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Why Vanguard Australian Shares High Yield ETF has performed well
One ETF that has quietly benefited from this environment is Vanguard Australian Shares High Yield ETF (ASX: VHY).
The VHY ETF focuses on high-yielding shares in the Australian market. This naturally leads him to sectors such as financials and resources, which have been among the strongest performers over the past year.
For example companies like Westpac Banking Corp (ASX: WBC) and BHP GROUP LIMITED (ASX: BHP) have both made solid gains, supported by strong earnings.
I think this highlights an important point. Market profits are not distributed equally. Leadership changes over time, and in the past year, revenue has returned. Vanguard Australian Shares High Yield ETF is designed to achieve this.
The distribution role
It’s also worth remembering that returns from such ETFs don’t just come from share price.
Distribution plays a big role. Over the past 12 months, the VHY ETF has paid dividends of 81.14 cents, 65.83 cents, 109.69 cents, and 200.17 cents per unit.
This adds a meaningful income stream on top of any capital growth.
What is investing in VHY ETF now?
Putting it all together. If you had invested $10,000 in the Vanguard Australian Shares High Yield ETF at $71.63 a year ago, you would have received about 139.6 units.
At today’s price of $82.98, these units would now be worth about $11,580.
On top of that, the total distribution for the year comes to about $4.56 per unit. in 139.6 units, which equates to about $637 in income.
This brings the total cost of the investment to about $12,217.
In other words, a $10,000 investment has grown just over 22% in one year.
Stupid takeaway.
I think this is a good example of how different parts of the market can excel at different times.
The VHY ETF has benefited from strong performance in dividend-paying sectors, as well as earnings from these companies. This combination has worked well over the past year.
Looking forward, I think this reinforces the value of diversity. Income strategies can have their moment, just like growth strategies. The key is both exposure and staying invested for the long term.
