Vanguard Australian Shares High Yield ETF (ASX: VHY) $82.11

The Vanguard Australian Shares High Yield ETF provides simple, low-cost exposure to some of Australia’s strongest dividend-paying companies. The fund holds over 33% in banks, which comes with risks around the current property market environment, but we feel it’s not too high, after the recent pullback, considering the yield. The fees on this ETF are reasonable at 0.25% given the difficulty of replicating the basket of ~100 stocks.

Importantly, VHY provides a very different risk profile to private credit. As a listed ETF, it comes with greater day-to-day price volatility and equity market risk, but investors benefit from greater liquidity and transparency, with the ability to move in and out during market hours. This ‘double-edged sword’ allows investors to avoid some of the liquidity risks associated with private credit, including potential gating or restrictions on redemptions during periods of market stress.

• The VHY ETF has yielded ~4.6% gross over the last 12-months, with distributions paid quarterly, plus it’s advanced more than +8.5% year-to-date, putting it well ahead of the ASX 200.

The VHY provides a solid alternative for Australian investors focusing on yield, combining attractive income characteristics with the potential for capital gain.

• We like the VHY for yield and potential market outperformance in the coming months, with its next dividend due in December.