Is This Dividend ETF a Suitable Option for Income-Focused Portfolios?

Core Viewpoint - The case for dividend-paying stocks is strengthening as investors look towards 2026, with evidence suggesting a potential uptrend has already begun [1] Group 1: ETF Performance - Over the past three months, the Vanguard High Dividend Yield ETF (VYM) has outperformed both the S&P 500 and the Nasdaq-100 indices, indicating a market shift away from megacap stocks [2] - The current yield of the Vanguard High Dividend Yield ETF is 2.5%, which is more than double the S&P 500's yield of 1.1%, suggesting a favorable income opportunity [4] Group 2: ETF Strategy and Holdings - The Vanguard High Dividend Yield ETF selects U.S. stocks based on their forecasted dividends over the next 12 months, focusing on those with above-average yields and weighted by market cap [3] - The ETF currently has a 14% allocation to tech stocks, with its top sector holdings being Financials (21%), Tech (14.3%), Industrials (12.9%), and Healthcare (12.8%), providing a diversified exposure to sectors with growth potential [5][6] Group 3: Economic Context - The economic backdrop, characterized by steady GDP growth, low unemployment, and stable inflation, is favorable for further gains in stock prices, particularly for value and dividend stocks [7] - Financials are benefiting from prolonged higher interest rates, leading to improved profit margins, while increased merger and acquisition activity is generating significant revenue for major banks [9] - Industrials may see cyclical upside if economic expansion continues, and the healthcare sector is experiencing innovation and potential regulatory relief, which could accelerate drug approvals and reduce compliance costs [9]