VYM Climbs 26% In a Year While Its Core Dividend Payers Extend Their Streaks

VYM is an ETF designed to deliver income by holding roughly 500 U.S. stocks that pay above-average dividends. The fund tracks the FTSE High Dividend Yield Index, which excludes REITs and selects companies using forecast dividend yield screening. VYM weights holdings by market capitalization and passes collected dividends to shareholders without using options income or leverage. The distribution’s safety depends on the weighted-average dividend reliability of the underlying companies, with greater influence from the largest positions. Key contributors include Johnson & Johnson, Procter & Gamble, Coca-Cola, Exxon Mobil, and AbbVie. Recent dividend increases and operating results for major holdings indicate cash generation that can support ongoing payouts.

"Every dollar VYM pays out comes from dividends collected on the underlying stocks; the fund uses no options income or leverage. That means the safety of VYM's distribution is the weighted-average safety of its holdings, with extra emphasis on the names at the top. Five companies in particular do most of the heavy lifting: Johnson & Johnson, Procter & Gamble, Coca-Cola, Exxon Mobil, and AbbVie. If those payouts hold, VYM's distribution holds."

"Johnson & Johnson ( NYSE:JNJ) just raised its quarterly payout to $1.34, its 64th consecutive annual increase. Q1 revenue grew nearly 10% and management raised full-year adjusted EPS guidance to $11.45 to $11.65. Reported net income fell sharply on litigation charges, but the underlying business is funding the dividend comfortably with EPS of $8.63 against roughly $5.20 in annual dividends, a payout ratio in the low 60s that leaves real cushion."

"Procter & Gamble ( NYSE:PG) extended its streak to 70 consecutive years of dividend increases, lifting the quarterly to $1.09. Cash flow does the reassuring here: free cash flow ran $3.03 billion in the most recent quarter, and P&G plans to return roughly $10 billion in dividends this fiscal year against a tariff and commodity headwind it has already absorbed into guidance."

Read at 24/7 Wall St.