The average dividend yield of the S&P/ASX 200 Index has dipped to just over 3.3% annually, significantly below its long-term average of 4% to 4.5%. This decline is largely attributed to reduced dividend payments from major banks and mining companies, according to estimates from Betashares. The company’s senior investment strategist, Cameron Gleeson, noted that Australia’s longstanding reputation as a high-dividend market is increasingly reliant on these sectors, creating concerns about the sustainability of overall market yields.
As dividends at the index level have fallen over the past two years, investors are seeking alternative sources of strong dividend income. For those not inclined to pick individual stocks, exchange-traded funds (ETFs) focused on high dividend yields present a viable option. Below are two notable ASX ETFs that offer attractive dividend yields above the market average.
Vanguard Australian Shares High Yield ETF (ASX: VHY)
The Vanguard Australian Shares High Yield ETF (ASX: VHY) stands as the largest dividend-focused ETF in Australia, managing assets worth $56.3 billion. In the fiscal year ending June 2025, VHY achieved a total return of 14.88%, surpassing the S&P/ASX 200’s total return of 13.81%.
The ETF aims to replicate the performance of the FTSE Australia High Dividend Yield Index, which comprises 75 companies. Notably, it excludes real estate investment trusts (REITs) and focuses on large-cap stocks, with approximately 70% of its portfolio derived from ASX 200 constituents. Current top holdings include BHP Group Ltd (10%), Commonwealth Bank of Australia (9%), and Westpac Banking Corp (7%).
Vanguard has structured this ETF to provide low-cost exposure to companies with higher forecast dividends relative to their peers. The investment strategy includes a cap on exposure, limiting any single industry to 40% of the total ETF and any single company to 10%. Over the past five years, VHY has delivered an average annual total return of 15.74% before fees, while the figure is 15.45% after fees. The management fee for this ETF is set at 0.25%.
Betashares S&P Australian Shares High Yield ETF (ASX: HYLD)
Recently launched, the Betashares S&P Australian Shares High Yield ETF (ASX: HYLD) has quickly gained attention, currently managing $37.5 million in net assets. This ETF aims to track the returns of the S&P/ASX 200 High Yield Select Index, which features 50 companies.
Top holdings in the HYLD ETF currently include Westpac and National Australia Bank Ltd, each at 11%, alongside ANZ Group Holdings Ltd at 10% and BHP at 9%.
What sets HYLD apart from traditional high-dividend strategies is its focus on filtering out potential “dividend traps.” These are stocks with unsustainably high dividend yields, often resulting from declining stock prices. Although long-term performance data for HYLD is not yet available due to its recent inception, the index it tracks has provided an average annual total return of 16.17% over the past five years and 10.1% over ten years. Like VHY, the management fee for HYLD is also 0.25% per year.
Investors seeking to enhance their portfolios with dividend-focused strategies may find these ETFs appealing as they navigate a market where traditional income sources are becoming less reliable.
