Building Retirement Income: Three High Dividend ETFs From Vanguard Worth Considering

For retirees depending on portfolio distributions, generating consistent, reliable income becomes one of the most important portfolio objectives. While many investors have focused on growth stocks and technology over recent years, 2026 has brought a meaningful shift in market dynamics. Asset classes that underperformed in the prior bull market—including energy, materials, value stocks, and dividend-focused equities—have started demonstrating renewed strength. This environment creates fresh opportunities for income-seeking investors who may now find better conditions for building sustainable dividend income streams.

The challenge with dividend investing, however, extends beyond simply selecting high-yield securities. Diversifying income sources across multiple asset types can help boost overall yield while reducing concentration risk that often accompanies overweighting a single equity segment. Vanguard offers several options that address these needs, with current offerings providing yields in the 2.5% to 4% range—meaningfully higher than the broader market average.

Market Environment Favors Dividend Strategies in 2026

The investment landscape has shifted noticeably as 2026 unfolds. For approximately three years leading into 2025, investor capital concentrated heavily on S&P 500 components, semiconductor firms, and what became known as the “Magnificent Seven” mega-cap technology stocks. High dividend yield strategies received considerably less attention during this period, particularly as artificial intelligence-related opportunities generated substantial returns across technology and adjacent sectors.

That trend has reversed recently. Traditionally underperforming areas such as international developed markets, value segments, and small-cap equities have produced strong returns thus far in 2026. International stocks, in particular, rebounded meaningfully against the S&P 500 during 2025 and have maintained that momentum into the current year. This represents a particularly notable development given the dominance U.S. equities have held over the past several years.

Vanguard High Dividend Yield ETF (VYM): Diversified Dividend Foundation

The Vanguard High Dividend Yield ETF stands as one of the primary pillars within Vanguard’s dividend-focused product suite. This fund pursues a straightforward approach: identifying stocks with above-average dividend yields from across a broad equity universe. The result is a portfolio structure that retirement investors can hold with minimal turnover or adjustment.

What distinguishes this high dividend ETF is its use of market capitalization weighting rather than yield weighting. Many comparable funds will construct portfolios weighted toward the highest-yielding stocks, which maximizes current income but introduces risks. Specifically, yield-weighting can concentrate exposure in companies where distributions may be vulnerable to cuts or where elevated yields primarily reflect recent stock price declines rather than sustainable business models.

By avoiding this approach, VYM’s yield strategy becomes more conservative. The trade-off involves some dilution in overall yield compared to funds using alternative weighting schemes, and the market-cap approach does grant larger companies proportionately greater influence despite potentially having weaker dividend histories than their smaller peers. Despite these considerations, the fund’s broad diversification produces a more stable income generation profile. The current dividend yield stands at approximately 2.5%.

Vanguard International High Dividend Yield ETF (VYMI): Geographic Diversification for Income

The Vanguard International High Dividend Yield ETF essentially replicates the strategy of its domestic counterpart but searches specifically across developed and emerging markets outside the United States for dividend opportunities. The fund maintains a diversified geographic allocation, currently holding approximately 80% in developed markets and 20% exposure to emerging markets. Within that structure, Europe and Asia receive roughly equivalent weighting, with an additional 8% allocation to Canada.

Like the domestic high dividend ETF, this fund also employs market cap weighting, creating a portfolio tilted toward large-cap multinational corporations. This positioning provides comfort that the fund targets more established, financially stable firms rather than speculative situations.

The timing for international dividend income has improved meaningfully. After substantial underperformance during the U.S. equity dominance of recent years, international stocks delivered strong returns throughout 2025 and have continued that performance trajectory into 2026. Many investors remain underweight international exposure relative to historical norms, leaving substantial opportunity for diversification benefits, higher dividend yields, and extended periods of outperformance that international equities can provide. For retirement portfolios particularly, spreading income sources geographically reduces concentration risk in any single market. This high dividend ETF currently provides approximately 4% yield.

Vanguard Real Estate ETF (VNQ): Alternative Income Through REITs

Real estate investment trusts have long served as an income-enhancement tool for retirement portfolios. The Vanguard Real Estate ETF provides broad exposure to REITs across multiple property types and sectors, often delivering yields that substantially exceed broader equity market averages—sometimes by two to three times.

The fund’s largest sector exposures currently span healthcare facilities, retail properties, industrial and warehouse operations, telecommunications tower companies, and data center REITs. This composition means investors gain indirect ownership across hospitals, shopping centers, manufacturing facilities, and the infrastructure supporting artificial intelligence operations.

Real estate delivers meaningful portfolio diversification benefits, and REITs in particular have historically shown relatively low correlation to traditional stock market movements. The Vanguard Real Estate ETF achieves this diversification exposure at minimal cost. For retirees, the primary attraction centers on exceptional yield, with current distribution yields near 3.5%.

However, real estate income strategies warrant careful consideration rather than automatic adoption. REITs demonstrate heightened sensitivity to changes in prevailing interest rates, credit market conditions, and general economic cycles. Rising rate environments in particular can pressure valuations and distributions, making it important that real estate income allocations receive appropriate risk management rather than excessive concentration within overall portfolio construction.

Constructing a Balanced Retirement Income Plan

These three high dividend ETFs from Vanguard offer distinct pathways for building multiple income streams within a retirement portfolio. Each addresses specific diversification needs—broad domestic equity dividend exposure, international geographic diversification, and alternative asset class diversification through real estate. Together, they can form the foundation of a retirement income strategy that generates yields above market averages while maintaining the broader portfolio stability that comes from proper diversification and realistic expectations about risk-return relationships.