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Vanguard All-World High Dividend

Index tracking funds and ETFs
petronius
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Vanguard All-World High Dividend

#229469

Postby petronius » June 14th, 2019, 12:31 pm

I'd like to gather opinions on Vanguard All-World High Dividend (VHYL). It tracks the FTSE All-World High Dividend Yield Index, that as far as I understand includes all world shares that exceed some dividend requirements (for details on the index see https://www.ftserussell.com/products/in ... dend-Yield )

I am considering VHYL as a way to increase my international exposure while avoiding FANGs and other very expensive shares that have been in fashion during the last 5-10 years (and that typically do not pay strong dividends). I am largely invested in FTSE 100 trackers and I am wary of high CAPE ratios for US shares.

Any thoughts?

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Re: Vanguard All-World High Dividend

#229473

Postby Alaric » June 14th, 2019, 12:52 pm

petronius wrote:Any thoughts?


A potential problem with such an index is that it picks out stocks that have a high yield, not because of dividend increases, but because the share price is under pressure. Looking down the list of UK names, it's not just confined to those in the FTSE 100.

It's a subset of a wider index, how have they compared over recent years? The dividend yield is presumably higher, but has this been counter balanced by a poorer capital performance?

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Re: Vanguard All-World High Dividend

#229501

Postby daveh » June 14th, 2019, 2:39 pm

Alaric wrote:
petronius wrote:Any thoughts?


A potential problem with such an index is that it picks out stocks that have a high yield, not because of dividend increases, but because the share price is under pressure. Looking down the list of UK names, it's not just confined to those in the FTSE 100.

It's a subset of a wider index, how have they compared over recent years? The dividend yield is presumably higher, but has this been counter balanced by a poorer capital performance?



According to the Vanguard site total return on a NAV basis is 29% for VWRL and 12% for VHYL Whereas the LSE site says VWRL is up 61% and VHYL up 32% both over 5years Not sure why the two performance figures are different, but the differential between the two is similar with the whole index outperforming the high yield version on a total return basis - if I read the charts and the explanatory info correctly. I'll see if I can find the index info later.


I had a look at the index values and they ~ match the Vanguard figures so not sure what the LSE site have done to get their values.
Last edited by daveh on June 14th, 2019, 2:46 pm, edited 1 time in total.

petronius
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Re: Vanguard All-World High Dividend

#229503

Postby petronius » June 14th, 2019, 2:43 pm

Yes, VHYL has strongly underperformed VWRL (all-world) over the past five years in terms of total return.

My question is, looking to the next five years, will VHYL overperform VWRL in case of a crash?

Selection is not limited to large companies, but it is a cap-weighted index, so small companies will have a small impact.

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Re: Vanguard All-World High Dividend

#229508

Postby Lootman » June 14th, 2019, 2:49 pm

petronius wrote:Yes, VHYL has strongly underperformed VWRL (all-world) over the past five years in terms of total return.

My question is, looking to the next five years, will VHYL overperform VWRL in case of a crash?

Currency would be a significant factor there, I'd imagine. The pound has been weak for a good number of years now, starting with the mortgage crisis and then with Brexit.

I do not own either but would much prefer to own the global ETF over the domestic ETF Why invest in only 6% of the global market cap?

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Re: Vanguard All-World High Dividend

#229521

Postby Alaric » June 14th, 2019, 3:37 pm

Lootman wrote:Currency would be a significant factor there, I'd imagine.


I thought they were both global trackers, the high yield one being based on a subset of higher yielding stocks. Currency effects are likely to be the same for both unless the subset doesn't have the same currency weightings.

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Re: Vanguard All-World High Dividend

#229527

Postby Lootman » June 14th, 2019, 3:44 pm

Alaric wrote:
Lootman wrote:Currency would be a significant factor there, I'd imagine.

I thought they were both global trackers, the high yield one being based on a subset of higher yielding stocks. Currency effects are likely to be the same for both unless the subset doesn't have the same currency weightings.

Yes you are right - I misread one of them as being a UK HY tracker.

In that case all I can think is that a HY tracker will avoid the better performing sectors, like Tech, and be over-weight in low-growth things like utilities and banks. The same issue with any kind of HY investing in fact.

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Re: Vanguard All-World High Dividend

#229542

Postby daveh » June 14th, 2019, 4:29 pm

Lootman wrote:
Alaric wrote:
Lootman wrote:Currency would be a significant factor there, I'd imagine.

I thought they were both global trackers, the high yield one being based on a subset of higher yielding stocks. Currency effects are likely to be the same for both unless the subset doesn't have the same currency weightings.

Yes you are right - I misread one of them as being a UK HY tracker.

In that case all I can think is that a HY tracker will avoid the better performing sectors, like Tech, and be over-weight in low-growth things like utilities and banks. The same issue with any kind of HY investing in fact.


My comment was on the difference between the performance figures I found on the LSE site and the Vanguard site. I believe the Vanguard figures are correct as they match the index figures I found on the site linked to in the OP's post.

It is clear that VWRL, the whole world tracker has outperformed the high yield version (VHYL) over the last 5 years. The OP was wondering if that was likely to continue into the future especially if we are moving into a recession. I'm afraid my crystal ball is faulty so can't really say. Evidence from my own high yield holdings is that high yield fell less than the index during the last recession and may do so again.


Having a look at the way the high yield index is constructed I would have a couple of worries about VHYL's performance. There is no measure to account for the quality of the dividend eg not picking shares with poor dividend cover, or any rules to stop over concentration in any market sectors eg purchasing lots of financial shares just before the finance crash.


I'm a high yield investor and would like to expand away from the UK. So far I've purchased IAPD, IDVY and EMDV for Asia pacific, Europe and emerging markets respectively. I've got no exposure to North America. I've though about VHYL but have been wary of the poorer performance compared to VWRL so should perhaps just buy VWRL. The other possibility is to look at some ITs from the income sector as an alternative (but not being passive that would be off topic for here).


Another possibility if worried about a recession might be VVAL which is Vanguard's value factor ETF - value usually performs well in Bear markets.

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Re: Vanguard All-World High Dividend

#229550

Postby petronius » June 14th, 2019, 4:55 pm

It is clear that VWRL, the whole world tracker has outperformed the high yield version (VHYL) over the last 5 years. The OP was wondering if that was likely to continue into the future especially if we are moving into a recession. I'm afraid my crystal ball is faulty so can't really say. Evidence from my own high yield holdings is that high yield fell less than the index during the last recession and may do so again.

Another possibility if worried about a recession might be VVAL which is Vanguard's value factor ETF - value usually performs well in Bear markets.
Top


Not looking for crystal balls, of course. I should have phrased it differently: Are there credible reasons to believe that the VHYL is likely to be more resilient than VWRL in a bear market?

VVAL sounds like an interesting option to achieve the same goal. What is the methodology behind it? How do they define value?

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Re: Vanguard All-World High Dividend

#229552

Postby petronius » June 14th, 2019, 4:59 pm

Oohhh! I just realised thar VVAL is...

:evil: active :evil:

(only joking, nothing against actively manged funds, if fees are 0.22%)

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Re: Vanguard All-World High Dividend

#229610

Postby mc2fool » June 14th, 2019, 8:24 pm

daveh wrote:According to the Vanguard site total return on a NAV basis is 29% for VWRL and 12% for VHYL Whereas the LSE site says VWRL is up 61% and VHYL up 32% both over 5years Not sure why the two performance figures are different...

Vanguard's figures are for the NAV value in USD. The LSE's figures are for the ETFs' share prices, which are in GBP. Both are correct but as a (presumably) GBP investor the latter is what you'd get.

http://mediacharting.digitallook.com/cg ... dicator_3=

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Re: Vanguard All-World High Dividend

#229624

Postby Spet0789 » June 14th, 2019, 10:19 pm

My wife owns VHYL. It tracks an index comprising the 50% of global companies paying higher dividend yields which are then weighted by market cap. So I don’t see it as a particular chase for yield play. It does have a lower weight to the US than VWRL which effectively gives exposure to the full universe.

Over the next 5 years I would expect the underperformance versus VWRL to reverse. Of course I may be wrong but I expect value to do better than growth and the rest of the world to do better than the US in future.

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Re: Vanguard All-World High Dividend

#229741

Postby daveh » June 15th, 2019, 4:42 pm

mc2fool wrote:
daveh wrote:According to the Vanguard site total return on a NAV basis is 29% for VWRL and 12% for VHYL Whereas the LSE site says VWRL is up 61% and VHYL up 32% both over 5years Not sure why the two performance figures are different...

Vanguard's figures are for the NAV value in USD. The LSE's figures are for the ETFs' share prices, which are in GBP. Both are correct but as a (presumably) GBP investor the latter is what you'd get.

http://mediacharting.digitallook.com/cg ... dicator_3=

I did so wonder if that was the case, but it seemed rather a large difference to be accounted for simply by currency fluctuations so didn't suggest it. Shows how badly sterling has performed against sterling over the last five years and how good at has been if you bought dollar denominated assets towards the start of the period.

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Re: Vanguard All-World High Dividend

#229742

Postby daveh » June 15th, 2019, 4:47 pm

petronius wrote:Oohhh! I just realised thar VVAL is...

:evil: active :evil:

(only joking, nothing against actively manged funds, if fees are 0.22%)

It's mechanicaly active, ie it follows a formula to choose the shares, which is what makes the fees so low compared to an active fund with a human manager.

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Re: Vanguard All-World High Dividend

#229824

Postby petronius » June 16th, 2019, 7:29 am

It's mechanicaly active, ie it follows a formula to choose the shares, which is what makes the fees so low compared to an active fund with a human manager.


I guess the same applies to VHYL - it involves mechanical calculation of dividend yields for selection of shares to be included.

The difference seems to be that dividends are actual, objective amounts that are paid, while value calculations involves less transparent estimates such as price-to-book ratios, estimated future earnings, etc.

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Re: Vanguard All-World High Dividend

#229844

Postby Alaric » June 16th, 2019, 9:14 am

petronius wrote:The difference seems to be that dividends are actual, objective amounts that are paid,


The other part of the formula is the price as in yield = dividend / price.

The problem with using a mechanical selection on higher yields is that it's very good at identifying shares where the price has fallen, thus increasing the yield. You are hoping that past performance isn't a guide to the future and that prices will rally. Otherwise what you gain in dividend, you lose in capital. In the UK market at least, Companies with an excellent record of dividend increases have a tendency (unless tobacco) to move to a price where their dividend yield is below market averages.

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Re: Vanguard All-World High Dividend

#230090

Postby StepOne » June 17th, 2019, 9:51 am

petronius wrote:
It's mechanicaly active, ie it follows a formula to choose the shares, which is what makes the fees so low compared to an active fund with a human manager.


I guess the same applies to VHYL - it involves mechanical calculation of dividend yields for selection of shares to be included.

The difference seems to be that dividends are actual, objective amounts that are paid, while value calculations involves less transparent estimates such as price-to-book ratios, estimated future earnings, etc.


I think VHYL follows an index, so it just buys shares in the same weighting as the index, like any other tracker. No calculations required, so it's passive, not active.

StepOne

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Re: Vanguard All-World High Dividend

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Postby Alaric » June 17th, 2019, 10:16 am

StepOne wrote:I think VHYL follows an index, so it just buys shares in the same weighting as the index, like any other tracker. No calculations required, so it's passive, not active.


But what are the rules that decide what goes into the index? It's not "whole market" so there's a decision process involved in selection of the stocks to form the index.

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Re: Vanguard All-World High Dividend

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Postby StepOne » June 17th, 2019, 10:23 am

Alaric wrote:
StepOne wrote:I think VHYL follows an index, so it just buys shares in the same weighting as the index, like any other tracker. No calculations required, so it's passive, not active.


But what are the rules that decide what goes into the index? It's not "whole market" so there's a decision process involved in selection of the stocks to form the index.


If the OP is correct the it's a FTSE Index that VHYL tracks, so it's the FTSE group that maintain the index constituents and weighting, not anyone at Vanguard. Works the same way as a FTSE-100 tracker, or any other tracker.

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Re: Vanguard All-World High Dividend

#230108

Postby Alaric » June 17th, 2019, 11:11 am

StepOne wrote:If the OP is correct the it's a FTSE Index that VHYL tracks, so it's the FTSE group that maintain the index constituents and weighting, not anyone at Vanguard.


Weighting by market capitalisation is regarded as a neutral way of constructing an index. Once you move to selecting subsets of a whole market, the rules chosen may introduce a bias. That particularly applies to a "high dividend" subset, given that stocks can become eligible by virtue of a maintained dividend coupled with poor share price performance.


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