Vanguard Australian Shares High Yield ETF (ASX: VHY) $86.27

As touched on earlier, MM believes the Budget has strengthened the relative appeal of equities offering attractive, sustainable yields, particularly where those dividends are fully franked, compared with property investment. Shifting Australians’ long-held preference (or obsession) for property will take time, but the changes to negative gearing and SMSF borrowing could prove meaningful as investors reassess the relative after-tax returns on offer. Against this backdrop, it is little surprise to MM that VHY has attracted strong inflows in recent months. With its focus on higher-yielding Australian equities, the ETF is well placed to benefit as investors increasingly look beyond property for reliable income and tax-effective returns.

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 30% in banks, which comes with risks around the current property market environment, but it’s not too high considering the yield they offer.

• The VHY ETF has yielded ~4.8% gross over the last 12-months, with distributions paid quarterly, plus it’s advanced more than +17% year-to-date, which by definition reduces its current yield.

VHY presents an interesting proposition for Australian investors, combining attractive income characteristics with the potential for a more favourable portfolio mix over time. While concentration remains a consideration, periodic rebalancing could increase/decrease exposure to the banks should the sector experience a sustained period of underperformance.

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