The boring fund won this year. That’s the whole story in one sentence, and it’s a stranger sentence than it should be.

Vanguard’s High Dividend Yield ETF (VYM) — 605 mature, dividend-paying companies, no REITs, a 0.04% expense ratio, the kind of fund nobody posts screenshots of on social media — has outrun the S&P 500 for most of 2026. Not by a rounding error, either. Through Aug. 4, VYM had generated a 16.58% cumulative total return against VOO’s 13.75%, according to 24/7 Wall St., a gap of roughly 2.8 points. By Aug. 20, 24/7 Wall St. had the spread even wider — VYM up 17% year-to-date versus the S&P 500’s 13%, crediting energy, industrials, and financials as AI-adjacent tech names cooled off.

If you’ve spent the last three years hearing that value and dividend investing are dead money next to anything with “AI” in the earnings call, this is the year that argument got harder to make. Whether it’s the start of something durable or a rerun of 2022 — when dividend funds also had their moment before growth stocks steamrolled back — is the actual question worth answering.

Quick Verdict: VYM vs. VOO in 2026

Factor	VYM	VOO
YTD total return (through Aug. 20, 2026)	~17%	~13%
YTD spread (as of Aug. 4 data)	16.58%	13.75%
10-year total return	207%	252%
Forward P/E	~16x	~23x
Holdings	605 companies	~500 companies
Expense ratio	0.04%	0.03%
2025 distributions as qualified dividend income	100%	N/A (mostly QDI)
Why it’s winning in 2026	Overweight energy, industrials, financials; near-zero AI megacap exposure	Overweight the AI megacaps that pulled back

Best for: Investors who want the current rotation into value, plus income, without picking individual energy or industrial names Skip if: You’re chasing this year’s number and ignoring the decade it took to get here

What Is VYM, Actually?

VYM tracks the FTSE High Dividend Yield Index — a rules-based screen that ranks U.S. companies by forward dividend yield, takes the top half of that universe by market cap, and excludes REITs and anything that hasn’t paid a regular dividend over the trailing 12 months. The result is 605 companies, weighted toward financials (roughly 21%), industrials (about 14-15%), and energy (around 9%), with a lighter tech slice than the S&P 500 and almost no exposure to companies like Nvidia or Microsoft that plow cash into growth instead of shareholders.

That screen is mechanical, not tactical. Nobody at Vanguard decided in January to bet against AI stocks. The index just can’t hold a company that doesn’t pay an above-average dividend, and most of 2026’s AI winners don’t. That’s the whole mechanism behind this year’s outperformance in one paragraph.

Why Is VYM Beating the S&P 500 in 2026?

1. AI-adjacent tech pulled back, and VYM barely owned it. The index’s yield screen filters out reinvestment-heavy growth names before the portfolio is even built. When mega-cap tech wobbled in 2026, VYM had little to lose because it never had much to begin with.
2. Energy and industrials led instead. 24/7 Wall St. pointed to VYM’s energy and industrials weightings as direct contributors to the 2026 gap, sectors that are structurally underweighted in a cap-weighted S&P 500 dominated by tech.
3. Valuation gave it room to run. VYM’s forward P/E sits near 16x against the S&P 500’s roughly 23x. Cheap, cash-generative businesses had more room to re-rate upward once sentiment turned away from momentum names.
4. It’s a low-cost, low-turnover index fund, which means none of this outperformance is getting eaten by fees or trading costs. At 0.04%, VYM’s expense ratio is basically a rounding error next to VOO’s 0.03%.

The Part That Should Slow You Down: The 10-Year Record

Here’s where I’d stop anyone from getting too excited. Over the trailing 10 years, VYM returned 207%. VOO returned 252%. That’s not a close race — it’s a 45-point gap in the S&P 500’s favor, built almost entirely on the back of the mega-cap tech run VYM was structurally excluded from.

This year’s rotation doesn’t erase that. It reverses a small piece of it. If you’d put $10,000 into each fund a decade ago, VOO would have handed you roughly $35,200 today; VYM would have handed you about $30,700. A great 2026 doesn’t close a gap that size — it takes the edge off it.

I think that’s the honest framing missing from a lot of the coverage this year: VYM isn’t “beating” VOO in any sense that matters over a full cycle. It’s having one good year after a long stretch of lagging, and the reason is specific — a rotation away from a handful of overcrowded growth names — not a structural repricing of dividend investing as a category.

Is This 2022 All Over Again?

It’s worth asking directly, because the pattern rhymes. Dividend and value funds also had a strong run in 2022 while growth stocks sold off, and plenty of people called it a permanent shift back toward “boring” investing. Then 2023 and 2024 happened, AI capex spending took off, and growth reasserted itself hard enough that VYM spent most of the following two years trailing again.

Nothing about 2026’s setup guarantees a different outcome. The AI capex story hasn’t ended — it paused. Earnings from the hyperscalers are still enormous, and if the pullback in those names turns out to be a buying opportunity rather than a trend change, VYM’s overweight to energy and financials won’t matter much against a resumed tech rally. This site’s coverage of the broader dividend-stock landscape under tariff pressure makes a similar point: sector rotations driven by a specific catalyst — tariffs, rate expectations, an AI pullback — tend to fade once that catalyst resolves, one way or the other.

What’s different this time, a little: the valuation gap. A 16x forward P/E against 23x is a wider spread than dividend stocks carried heading into 2022’s rotation, which gives value more of a cushion if sentiment cools further. That’s a real difference. It’s not a guarantee.

The Tax Angle Nobody’s Talking About

One number in VYM’s favor that has nothing to do with 2026’s rally: 100% of VYM’s 2025 distributions qualified as qualified dividend income. That means most holders paid long-term capital gains rates on those payouts instead of ordinary income rates — a meaningful difference if you’re in a higher bracket and holding this in a taxable account.

It’s a small, unglamorous edge, but it’s the kind of thing that shows up every year regardless of whether value or growth is leading. The fee math on Vanguard’s other low-cost funds tells a similar story — small, boring advantages compound quietly while everyone’s watching the headline return number.

VYM vs. VOO: Who Should Actually Buy Which?

VYM makes sense if you want current income with your total return, you’re underweight energy and financials elsewhere in your portfolio, or you think the AI-led concentration in the S&P 500 has made VOO riskier than its “diversified index fund” reputation suggests. VOO now carries roughly a third of its weight in a handful of mega-cap tech names — that’s not the diversified basket it was a decade ago.

VOO still makes sense if you’re investing for growth over a multi-decade horizon and you’re comfortable that the last 10 years are the more representative sample than the last seven months. The math above isn’t subtle: VOO’s 10-year record beats VYM’s by 45 points. One good year doesn’t override that base rate.

A blend makes sense for most people. This isn’t a case where you need to pick a side. Holding both — or holding VOO as a core position with a VYM tilt for income and value exposure — captures the growth engine while hedging against exactly the kind of concentration risk that showed up this year. That’s the same logic behind pairing a broad fund with a dividend-focused pick like SCHD: different screens, overlapping but not identical exposure. And the math on what dividend income actually requires applies here too: VYM’s roughly 2.3% yield isn’t going to replace a salary on its own, no matter how good 2026 looks.

The Bottom Line

VYM’s 2026 is real. The numbers check out, the mechanism behind them is understandable, and the valuation gap gives the rotation more room to run than it had in 2022. I wouldn’t wave it off as a fluke.

But I also wouldn’t rewrite ten years of index-fund conventional wisdom because of seven strong months. VOO still holds the long-term record by a wide margin, the AI capex story isn’t over, and dividend funds have made this exact move before — right before growth stocks came roaring back. Own VYM for what it actually is: a well-built, cheap, tax-efficient value-and-income fund that’s having a very good year. Don’t own it because you think boring just beat exciting for good. That verdict needs a lot more than one year of data.

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Performance and holdings data from 24/7 Wall St.’s Aug. 29, 2026 coverage and 24/7 Wall St.’s Aug. 20, 2026 report. Fund methodology and expense ratio from Vanguard’s official VYM product page. Figures are current as of the cited dates and can move quickly — verify before acting. This isn’t financial advice.