VYM's reign is being challenged

Vanguard's VYM has been the go-to dividend ETF for years, holding 500 stocks with broad exposure. But in 2026, BlackRock's smaller HDV fund has quietly pulled far ahead.

The performance gap is massive

From January 2 through September 3, 2026, VYM returned 15.29% while HDV returned 23.85%. That's an 8.56-point gap in just eight months, in the same asset class.

“From January 2, 2026 through September 3, 2026, VYM returned 15.29% on a total-return basis. Over the same window, HDV returned 23.85%.”

HDV uses a completely different approach

HDV screens for companies with strong economic moats and financial health, then ranks by dividend yield. This creates a 75-stock portfolio tilted toward energy, healthcare, and staples.

The yield gap is substantial

HDV's 30-day SEC yield is 3.34% versus VYM's 2.20%. On a $50,000 position, that's roughly $1,670 in annual distributions from HDV versus $1,100 from VYM.

But VYM has a fee advantage

Vanguard cut VYM's expense ratio to 0.04% in 2026, half of HDV's 0.08%. Over decades, that four-basis-point gap compounds, though HDV's returns currently swamp this advantage.

HDV carries concentration risk

With roughly 75 holdings versus VYM's 500-plus, HDV is far more concentrated. If energy or healthcare rolls over, HDV will fall harder than VYM would.

The style tilt cuts both ways

HDV's quality and yield screen has helped in a year rewarding defensives. But in a growth-led year, HDV could trail VYM by a similar margin. This is a deliberate factor bet.

Tax matters if you switch

In a tax-advantaged account, swapping is simple. In a taxable account, check your cost basis first. A large unrealized gain could trigger capital gains that erase years of HDV's income edge.

Choose based on your goal

Want diversified, low-cost market-like dividend exposure? VYM is still right. Want income plus quality with a defensive tilt? HDV is the better choice, with more concentration risk.