3 Low-Cost ETFs Spreading Income Across Hundreds of Holdings. One Still Puts 7.35% Behind a Single Company

Investing in numerous stocks is often perceived as a safer strategy, but the way certain income-focused exchange-traded funds (ETFs) manage their holdings can lead to significant concentration in specific companies. This is particularly evident in three low-cost ETFs: the Vanguard High Dividend Yield ETF (NYSEARCA:VYM), the iShares Core Dividend Growth ETF (NYSEARCA:DGRO), and the Vanguard Morningstar Value ETF (NYSEARCA:VTV). Despite holding hundreds of stocks, one major semiconductor company, Broadcom (NASDAQ:AVGO), commands a considerable portion of the assets in these funds.

According to the N-PORT filing dated July 31, 2026, the Vanguard High Dividend Yield ETF reported a total of 616 positions, with Broadcom accounting for 7% of the fund’s net assets. This illustrates that even with a diverse portfolio, a significant allocation can still be directed towards a single entity.

The other two ETFs differ in their investment strategies. DGRO primarily focuses on companies that demonstrate consistent dividend growth, while VYM emphasizes high current yields. Meanwhile, VTV targets stocks with lower valuations. Although VTV may seem like a less obvious choice since its income generation is a byproduct of its stock selection strategy, it still attracts attention for its distinct approach.

DGRO follows a dividend growth index curated by Morningstar, which exclusively includes firms with a history of increasing dividends. Importantly, it excludes stocks with yields in the top 10% of the eligible universe, as these high yields can signal potential dividend cuts. As of the same July filing, DGRO listed 394 positions, which include at least one futures contract. The top holdings in DGRO are relatively balanced, with JPMorgan Chase (NYSE:JPM) and Broadcom each holding a weight of 3% in the fund.

The expense ratio for DGRO is set at 0.08%, making it the most expensive of the three funds. This filtering for growth may result in lower current income. The fund’s quarterly distributions have varied, with a September payout of $0.38 per share, an increase from $0.33 in June, while the December 2025 distribution was reported at $0.45.

On the other hand, VYM tracks the FTSE High Dividend Yield Index, which includes U.S. stocks with above-average forecast dividend yields, excluding real estate investment trusts (REITs) and weighting each stock by market capitalization. This method accounts for Broadcom's substantial presence in the fund. As of the July filing, VYM had net assets of approximately $99 billion, with Broadcom at 7% and JPMorgan at 4%. VYM has a lower expense ratio of 0.04% compared to DGRO.

Distributions from VYM can fluctuate; the September payout was $0.89 per share, down from $0.98 in June. Over the past year, the total distributions reached $3.68 per share.

The Vanguard Morningstar Value ETF, VTV, follows a large-cap value index that was previously the CRSP version until Morningstar acquired CRSP in February 2026. The index ranks large companies based on valuation metrics such as book-to-price and earnings multiples. Although dividend yield is a consideration, companies without a dividend history can still qualify for inclusion. This strategy means VTV's income relies on the valuation of its holdings, which can include firms that are reducing their dividends.

VTV has shown strong performance recently, with a year-to-date increase of 17%, outpacing both DGRO and VYM, which each saw a 13% rise. The September payout for VTV was $1.02 per share, a decrease from $1.08 in June.

The disparity in how Broadcom is weighted in these funds highlights the different exposures investors face. In VYM, Broadcom represents 7% of net assets, while in DGRO, it is only 3%. This difference arises from the respective index methodologies, where VYM's market-cap weighting amplifies the impact of larger companies, while DGRO’s growth filter minimizes concentration risk.

Investing in numerous stocks can mitigate the risk of a single company’s dividend cut affecting overall income. However, the weight distribution among holdings is crucial. VYM's July filing illustrates this, showing Broadcom at 7% while many other positions are below 1%. DGRO tends to have more evenly distributed weights among its top holdings. VTV, being weighted by market value, places greater emphasis on its largest value stocks.

VTV also boasts the lowest expense ratio at 0.03%, followed by VYM at 0.04% and DGRO at 0.08%. This cost efficiency may appeal to various investors, depending on their income and growth preferences. DGRO provides a balanced exposure that limits the influence of any single company, while VYM is attractive for those seeking regular income with a notable concentration risk in specific stocks.