Key Morningstar Metrics for Vanguard FTSE Canadian High Dividend Yield Index ETF VDY
- : NeutralMorningstar Medalist Rating
- : Below AverageProcess Pillar
- : Above AveragePeople Pillar
- : HighParent Pillar
Vanguard FTSE Canadian High Dividend Yield ETF delivers an impressive yield, but concentration among its top stocks is cause for concern.
The fund tracks the FTSE Canada High Dividend Yield Index, which selects stocks from the broader FTSE Canada All Cap Domestic Index based on forecast dividend yields. The index includes stocks in descending order of forecast yield until the portfolio represents 50% of Canada’s total market cap. Holdings are then weighted by float-adjusted market cap. This emphasizes large and established firms while avoiding some pitfalls of yield-weighting, which can favor companies with declining fundamentals and prices.
Despite its sound construction process, the strategy is constrained by the concentration of the Canadian stock market. Financial and energy companies already occupy a significant share of the investable universe, and the fund’s dividend focus further increases exposure to these sectors. More than 87% of assets were invested in financials and energy in June 2026, far above the Morningstar Category average of 57%. The portfolio is also highly concentrated at the stock level, with more than 68% of assets allocated to its top 10 holdings, compared with 38% for the average peer.
Concentration presents risk, but it has also been a primary driver of the fund’s strong track record. It outperformed the Canadian dividend and income equity category average by 3.24 percentage points annualized from its 2012 inception through June 2026. Much of that success has been driven by strong performance from its largest holdings: Royal Bank of Canada, Toronto-Dominion Bank, and Bank of Montreal. The fund has also delivered an attractive yield, generating an average trailing 12-month yield of 4.06% over the past 10 years through June 2026.
Vanguard FTSE Canadian High Dividend Yield Index ETF: Performance Highlights
The fund’s concentration has driven strong performance. Its 9.91% annualized return beat the Canadian dividend and income category average by 3.24 percentage points from its inception in 2012 through June 2026.
A heavy stake in financials companies has been particularly beneficial in recent years. Canada’s largest banks have been among the market’s strongest performers, and the fund’s more than 20-percentage-point overweighting in the financials sector relative to the category average has allowed it to capture much of that upside. The next-largest sector allocation to energy stocks also proved its place in the portfolio during 2022. Energy cushioned losses in 2022 as markets declined, helping the fund outperform more diversified peers.
The same performance drivers remained in place during the first half of 2026 and led to especially strong results. The Royal Bank of Canada, the fund’s largest holding, gained nearly 23%, while Toronto-Dominion Bank and Bank of Montreal, the second- and third-largest positions, each returned more than 30%. Given the fund’s concentrated structure, strong gains from these top holdings helped it more than double the category average return during the first half of 2026. While these concentrations can sometimes magnify gains, they can also magnify losses when those positions fall out of favor.
