The All World High Dividend Yield (VHYL) holds over 1,100 higher yielding large cap companies listed all around the world. The largest sector at 40% is USA followed by UK 11%, Switzerland 5.6%, Japan 5.6%, Australia 4.3% - other significant countries are France, Canada, Germany, China and Taiwan.
Top 10 holdings are Exxon Mobil, Microsoft, Johnson & Johnson, General Electric, Wells Fargo, Nestle, JP Morgan Chase, Novartis, Procter & Gamble, Verizon and AT&T.
As with funds, all income is distributed so can be lumpy and unpredictable. For example, during the year to end June 2014, the distribution was $194.63 whereas in 2015 the distribution reduced to just $156.60 - 19.5% less in dollar terms. Unlike my investment trusts, I am never quite sure what income to expect at the end of each quarter - also there are FX considerations as the dollar distribution is converted to GB pounds. The original target yield was 4.0% and in my first year, this is close to what I received but it seems that was always going to be a tall order to meet - the current yield has fallen to ~3.0%.
My original purchase price in June 2013 was £31.60 and last year I topped up my holding giving an average price of £33.30. The current price is £34.00 and I have received income of £4.47. My 3 year annualised returns todate are ~4% p.a. In my previous post I compared my basket of inv. trusts to my index funds over the past 5 years and was a little surprised to see the VHYL index annual returns at just 3.65%.
I had a look at the All World ETF (VWRL) returns for the past 3 years and they are 5.29% p.a. also Vanguard’s FTSE All World (ex UK) index fund has returned 8.4% p.a over the same period - this is more what I would expect given the S&P 500 is up 28% since June 2013. OK it excludes UK listed companies which will have some bearing but the VHYL has only 11% weighting so I would not think it should drag back returns by over 4% per year!
|3 yr chart VHYL v FTSE Developed World (ex UK)|
(click to enlarge)
I have also monitored progress to see how this ETF compares to my equity/bond Vanguard LifeStrategy 60. This has returned 5.37% p.a. over the past 3 years combined with less volatility….mmm pause for thought!
One advantage of holding this ETF within my Youinvest ISA is the avoidance of the 0.20% per annum platform charges levied on Vanguard funds. Also, there is no 0.5% stamp duty to pay on purchase.
However, with 3% natural yield and just 1% capital appreciation each year, I am missing out on an average 1.5% - 2.0% return each year - maybe 4% on my basket of investment trusts.
Given the natural yield is not great and the total return figures are lower than comparable global funds, I may consider a sale of this ETF and switch the proceeds to my lower volatility VLS60 fund at some point. I am just awaiting the quarterly dividend announcement for payment at the end of June and will then make a decision.