Want to Generate Thousands of Dollars in Passive Income? This ETF Could Be Your Ticket

Want to Generate Thousands of Dollars in Passive Income? This ETF Could Be Your Ticket

Leo Sun, The Motley Fool

Wed, August 19, 2026 at 10:27 PM GMT+3 3 min read

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The Vanguard High Dividend Yield ETF (NYSEMKT: VYM) is a popular exchange-traded fund for income-oriented investors. It passively tracks the FTSE High Dividend Yield Index, which includes over 600 U.S. dividend-paying stocks with above-average yields, and charges a low expense ratio of 0.04%. It had a 30-day SEC yield of 2.22% at the end of July.

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Why could VYM be a great income play?

VYM's underlying index ranks dividend-paying U.S. companies by their expected yield for the next 12 months. It then chooses the top-yielding half and weights them by market capitalization. It also intentionally excludes real estate investment trusts (REITs), which generally pay high yields but don't qualify for lower tax rates. That process of elimination causes VYM to gravitate toward stable, mature sectors -- including financials, industrial, healthcare, consumer staples, and energy -- while giving it less exposure to the tech sector than the major market indexes.

VYM pays a lower yield than other dividend-oriented ETFs, but it's generated a total return of nearly 500% since its inception in Nov. 2006. Parking $50,000 in VYD would net you $1,100 in annual dividends today, and reinvesting that income could boost your payout to thousands of dollars per year over the next few decades.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.

Want to Generate Thousands of Dollars in Passive Income? This ETF Could Be Your Ticket was originally published by The Motley Fool