If You Invest $1,000 in the Vanguard High Dividend Yield ETF Right Now and Never Add Another Dollar, Here's What History Says It Could Deliver in 20 Years
2026-08-01 14:30
•Matt Dilallo •The Motley Fool
•••• •••••••••••• Axe Cap view
Dividend ETFs: A Long-Term Buffett-Style Play for South Africans?
Vanguard's High Dividend Yield ETF shows solid history but how relevant is it for local investors?
Vanguard’s High Dividend Yield ETF (VYM) has averaged over 9% annual returns since 2006, which is nothing to sneeze at. The idea of letting $1,000 grow to nearly $6,000 in 20 years through the magic of dividends and compounding is certainly appealing. But keep in mind this is a US-dominated portfolio — more than 600 stocks weighted heavily towards sectors like financials and tech. For South African investors, the question is: does this model translate locally? Dividend investing has deep roots here, especially in banks like Standard Bank or industrial plays like Barloworld that consistently generate cash and pay dividends. However, the rand’s volatility can erode returns in dollar-based ETFs. If the rand weakens significantly against the USD, those gains could look smaller in local terms. Still, a steady dividend strategy resonates with many here given the inflation risks and need for income. This makes the concept—not necessarily VYM itself—a useful mental model for building a buy-and-hold portfolio focused on quality businesses with healthy payouts. this is just our opinion and not financial advice
South African investors should watch and build local dividend champions like Standard Bank or Barloworld while keeping an eye on USD/ZAR exchange moves before adding US dividend ETFs like VYM.
- Standard Bank
- Barloworld
- USD/ZAR
- Rand depreciation eroding dollar-based returns
- US market downturn affecting VYM's holdings
6/10
The Vanguard High Dividend Yield ETF (VYM) has historically delivered a 9.32% annualized total return since 2006, outperforming non-dividend stocks. Based on historical performance, a $1,000 investment could grow to nearly $6,000 in 20 years through compounding, representing a ~500% total return. The ETF's broad diversification across 600+ stocks and low expense ratio make it suitable for long-term buy-and-hold investors seeking passive income.
Our take is based on reporting first published by The Motley Fool.