VDY vs VFV: Dividend Income or S&P 500 Growth?

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If you are comparing VDY vs VFV, you are really deciding between Canadian dividend income and long-term U.S. growth.

VDY is a Canadian dividend ETF built around high-yield sectors like banks and energy. It is designed for investors who want more cash flow and are comfortable with a portfolio that is heavily tilted toward a few parts of the Canadian market. VFV, by contrast, is a low-cost S&P 500 ETF that gives you exposure to large U.S. companies and is usually the better fit for investors focused on long-term growth.

That is why these two ETFs are popular with Canadian investors, but they are not really built for the same job. If you want monthly dividend income and Canadian exposure, VDY can make sense. If you want a simpler growth-first ETF with broader sector exposure, VFV is usually the better pick.

If you are new to ETFs, it also helps to understand the basics of what an ETF is and what MER means before deciding which fund belongs in your portfolio.

Quick verdict: Choose VFV for a low-cost, growth-focused S&P 500 ETF — the better default for most long-term investors. Choose VDY if you specifically want monthly Canadian dividend income and accept that about 86% of the fund sits in financials and energy.

VDY Overview

VDY (Vanguard FTSE Canadian High Dividend Yield Index ETF) is a Toronto-listed ETF that holds high-dividend-paying Canadian stocks. It was launched in November 2012, and since then has become a go-to fund for investors seeking income from Canada’s equity market. VDY’s goal is to track the FTSE Canada High Dividend Yield Index, which selects large and mid-cap Canadian companies with above-average dividend yields. In practice, this means VDY owns many of the well-known Canadian bank stocks, pipeline and utility companies, telecommunications firms, and a few others – essentially the pillars of Canada’s dividend-paying corporations.

Key details:

• Inception: November 2, 2012
• Assets Under Management (AUM): ~$7.5 billion CAD
• Management Expense Ratio (MER): 0.22%
• Equity Yield: 3.4%
• Number of Holdings: 61
• Risk Level: Medium

In terms of holdings, VDY is concentrated. The fund’s top 10 holdings make up about 67.8% of the portfolio, and they read like a who’s who of Canadian blue chips. At the top are the big banks: Royal Bank of Canada (~14.5% of the fund), TD Bank (~10.4%), plus BMO (~6.2%), CIBC (~6.0%), and Scotiabank (~5.6%). Energy is the other pillar: Enbridge (~6.9%), Canadian Natural Resources (~5.6%), Suncor (~4.7%), and TC Energy (~4.0%). You’ll also find telecoms, insurance, and utilities. Because of this, VDY’s sector exposure is heavily skewed — about 56.0% in financials and 30.2% in energy, or roughly 86% in just those two sectors. This reflects the composition of high-yield stocks in Canada: they are mostly banks and oil/gas or pipeline companies. While these sectors offer strong dividends, it means VDY lacks exposure to other areas like technology or healthcare.

The main attraction of VDY is the reliable income stream – the monthly payouts are appealing for those who want cash flow. Investors often use VDY in TFSAs for tax-free dividend income or in RRSPs for retirement income. Just remember that with VDY you are betting heavily on Canada’s financial and energy sectors. It’s a focused equity play with a high yield.

VFV Overview

VFV (Vanguard S&P 500 Index ETF) is a broad-market equity fund that gives Canadian investors an easy way to invest in the U.S. stock market. Also launched in November 2012​, VFV tracks the famous S&P 500 Index – which represents 500 of the largest publicly traded companies in the United States. Essentially, VFV holds the same stocks as the U.S.-domiciled S&P 500 ETFs (like Vanguard’s own VOO) but trades in Canadian dollars on the TSX. This fund has exploded in popularity; VFV now manages about $30.2 billion CAD in assets, making it one of the largest ETFs in Canada. The MER of VFV is 0.09% — extremely low, and a big reason cost-conscious investors flock to it.

Key details:

• Inception: November 2, 2012
• Assets Under Management (AUM): ~$30.2 billion CAD
• Management Expense Ratio (MER): 0.09%
• Equity Yield: 1.1%
• Number of Holdings: 505
• Risk Level: Medium

VFV’s portfolio is essentially the entire S&P 500 index. It holds around 500 stocks (currently 505 holdings). These are the giants of the U.S. economy across all major industries. The top 10 holdings in VFV account for roughly 39.8% of the fund. Those top holdings are dominated by U.S. tech and tech-related giants: NVIDIA (~7.9%) is now the largest single holding, followed by Alphabet (~6.5%), Apple (~6.5%), Microsoft (~4.9%), Amazon (~4.2%), Broadcom (~3.2%), Meta (~2.2%), Tesla (~1.7%), Berkshire Hathaway (~1.4%), and JPMorgan Chase (~1.3%). This means VFV is quite top-heavy in tech/growth stocks, as is the S&P 500 index itself.

Sector-wise, VFV is much more diversified than VDY — it covers all 11 sectors of the U.S. market. However, the weighting is uneven: Information Technology is about 35.0% of the fund, followed by Financials (~12.0%), Communication Services (~11.0%), Consumer Discretionary (~10.0%), Industrials (~8.8%), and Health Care (~8.5%). In short, VFV gives you broad exposure to the U.S. market, but keep in mind it’s heavily influenced by the performance of big tech stocks due to their large index weight.

VFV pays quarterly distributions (dividends) to investors. However, because the S&P 500 stocks on average have a lower dividend yield, VFV’s equity yield is much lower than VDY’s — around 1.1%. Don’t expect high income from VFV; its main appeal is growth. One important aspect: VFV is denominated in Canadian dollars, but it invests in U.S. equities. Vanguard does not currency-hedge this ETF, so VFV is exposed to USD/CAD fluctuations. If the Canadian dollar weakens against the U.S. dollar, VFV’s returns (in CAD) get a boost, and if the loonie strengthens, VFV’s returns can be dampened. Over long periods, currency moves can even out, but it does add an extra layer of volatility. (Some investors choose the hedged version, VSP, to eliminate currency risk, but that has its own trade-offs.)

VDY vs VFV: Side-by-Side Comparison

Fund data sourced from Vanguard Canada’s April 30, 2026 VDY factsheet and VFV factsheet. ETF metrics change, so verify current figures before investing.

What $10,000 in VDY vs VFV would have become

Yield is only part of the story. Vanguard’s April 30, 2026 factsheets list annualized NAV total returns, which include changes in unit value and reinvested distributions before personal taxes. If you compound those annualized returns, a $10,000 investment would have looked roughly like this:

Source: Vanguard Canada VDY factsheet and VFV factsheet, total returns for periods ending April 30, 2026. Ending values are WealthRadiant calculations using Vanguard’s annualized NAV total-return figures and are rounded to the nearest dollar.

Methodology: the ending values use the formula $10,000 × (1 + annualized NAV total return)^years. Vanguard describes these total-return figures as historical annual compounded returns that include changes in unit value and reinvested dividends or distributions, before personal income taxes, trading commissions, or optional charges.

This is the useful nuance. VDY’s higher yield did not make it worse in every recent period. Canadian banks and energy had a strong run, so VDY led over these 3- and 5-year windows. Over 10 years, VFV’s U.S. growth exposure still compounded to the higher ending value.

The takeaway: judge VDY by total return, not yield alone. Monthly distributions are useful if you want income, but the dividend is only one part of the return. For a long-term investor who reinvests distributions, the ending portfolio value matters more than the cash yield printed on the factsheet.

What is a Yield Trap? (And why VDY investors should care)

A yield trap is an investment that looks attractive because of a high dividend yield but actually loses you money as the underlying price falls. In the VDY vs VFV debate, the point is not that VDY is automatically a yield trap. The point is that VDY’s monthly cash flow should be judged against total return, concentration risk, and your account strategy. Vanguard’s April 30, 2026 data shows VDY leading over the latest 3- and 5-year annualized windows, while VFV led over 10 years.

How to spot a yield trap:

• Stagnant Share Price: If an ETF’s yield is rising only because the share price is falling, your “income” is being offset by a loss in your principal investment.
• High Payout Ratios: Look at the underlying holdings. If companies like BCE or certain Pipelines are paying out more than they earn to maintain dividends, the yield is unsustainable.
• Sector Concentration: VDY is heavily weighted in Financials and Energy. If these sectors face a downturn, your high dividend won’t protect you from a double-digit drop in portfolio value.

The Bottom Line: Total return matters more than yield alone. VDY can have strong total-return periods when Canadian banks and energy stocks are working. VFV can still compound better over longer windows when U.S. large-cap growth leads. That is why the right choice depends on whether you are buying an income tilt or a growth-first core holding.

VDY vs VFV: Pros and Cons

VDY Pros:

• High dividend yield
• Monthly dividend payouts
• Tax advantages (Canadian dividends)
• Established blue-chip Canadian companies

VDY Cons:

• Sector concentration risk (financials, energy)
• Limited geographic diversification
• Lower capital appreciation potential

VFV Pros:

• Broad market diversification (500 U.S. companies)
• Strong historical capital growth
• Very low MER
• Easy exposure to leading global companies

VFV Cons:

• Lower dividend yield
• Exposure to currency fluctuations (CAD/USD)
• No Canadian market exposure
• U.S. dividend withholding tax implications

Why Choose VDY vs VFV?

In essence, when comparing VDY vs VFV, choose VDY if you specifically want Canadian dividend income and are okay with its concentration, and choose VFV if you want broad U.S. market exposure and higher growth potential with lower yield. Some investors even choose neither exclusively but use both for a mix.

So, which one is “better”? There is no one-size-fits-all answer – it truly depends on your objectives:

• If you need high income now and prefer Canadian stocks (perhaps for tax reasons or familiarity), VDY is a strong candidate. A recent 3.4% equity yield from a basket of well-known Canadian banks, pipelines, and utilities is hard to replicate without taking on more single-stock risk.
• If you are aiming for growth and maximum diversification in equities, VFV (or a similar broad market fund) is likely a better core holding. The U.S. market’s depth and Vanguard’s low fee make it very compelling for long-term growth investors.
• There’s also nothing wrong with splitting your investment between the two, as discussed, to get both income and growth. In fact, combining them (or switching between them) can adjust your portfolio’s yield and sector exposure to your liking.

Should You Hold Both?

Holding both VDY and VFV can be strategic, offering combined dividend income and market growth, as well as geographic diversification. Ensure allocations align with your investment goals, avoiding unnecessary overlap with other holdings.

Who Should Buy VDY vs. VFV?

Choosing between these two depends entirely on your financial stage. Here is the breakdown:

You should buy VDY if:

• You need immediate cash flow: You prefer monthly distributions to cover living expenses or to reinvest manually.
• You have a shorter time horizon: You are nearing retirement and want to lower your exposure to the volatile U.S. tech sector.
• You want tax efficiency in a non-registered account: You want to take advantage of the Canadian Dividend Tax Credit.
• You have a “Home Bias”: You believe the Canadian banking and energy sectors are undervalued compared to U.S. tech.

You should buy VFV if:

• You are a long-term growth investor: You have 10+ years until retirement and want to capture the massive growth of the S&P 500.
• You want sector diversification: You want exposure to Technology, Healthcare, and Consumer Discretionary—sectors that are underrepresented in Canada.
• You are okay with lower dividends: You prioritize Total Return (capital gains + dividends) over high monthly payouts.
• You have a high risk tolerance: You can stomach the volatility of “Magnificent 7” stocks like Nvidia, Apple, and Microsoft.

Both VDY and VFV trade commission-free on Canadian discount brokerages like Questrade and Wealthsimple. If you are still choosing where to buy ETFs, compare Wealthsimple vs Questrade before opening or moving an account. For Canadian DIY investors, Questrade offers commission-free Canadian-listed ETF buys plus separate CAD/USD account balances — useful if you ever expand into U.S.-listed funds. Open a Questrade account to get started.

Final Thoughts

VDY and VFV are both excellent ETFs in their own right, but serve different investor needs. To recap, VDY is all about Canadian high-dividend stocks, offering a hefty yield and monthly income, but with concentrated exposure to a few sectors. VFV is about capturing the performance of the U.S. stock market, with broad diversification and strong growth potential, but a lower dividend and exposure to currency movements.

If you’re an investor with a moderate risk tolerance looking to build a well-rounded portfolio, you might not actually view VDY and VFV as direct competitors but rather as complementary pieces. For someone starting out, a classic approach might be to hold a broad Canadian index fund plus a broad U.S. index fund – in which case one could argue VFV fits that bill for U.S., whereas VDY is a more niche choice for Canada (versus a broad Canada fund). Still, VDY’s popularity indicates many investors prefer that dividend focus for their Canadian equity portion.

Remember that both ETFs can be held in registered accounts like TFSAs and RRSPs without concerns, so you have flexibility in how to deploy them tax-efficiently. For instance, an approach could be: hold VFV in an RRSP (where the U.S. dividends face no additional tax and grow tax-deferred) and maybe hold VDY in a TFSA (tax-free Canadian dividend income). Each investor’s situation will differ.

As always, align any investment choice with your personal goals, time horizon, and risk comfort. Both funds are from Vanguard, a reputable provider, and have low fees, so you’re in good hands either way on those counts. The decision really boils down to what mix of assets you want to own. Consider consulting with a financial advisor if you’re unsure how these ETFs fit into your broader plan. But with the information in this article, you should have a clearer picture of what each of VDY and VFV can do for you.

Happy investing, and may your portfolio find the right balance of growth and income!

Check out our other ETF comparison articles:

• XEQT vs VFV
• XEQT vs VEQT
• VFV vs VGRO
• Best Canadian ETFs in 2026 — full guide to picking by category

VDY vs VFV FAQ

Can I hold VDY or VFV in my RRSP or TFSA?
Yes, both ETFs are eligible for TFSAs and RRSPs, offering tax-advantaged growth.

Do VDY and VFV pay dividends?
Yes. VDY pays monthly distributions and had a recent equity yield of 3.4% in Vanguard’s April 30, 2026 factsheet. VFV pays quarterly distributions and had a recent equity yield of 1.1%.

What’s the risk level?
Both ETFs are rated medium risk, with VDY’s risk stemming from sector concentration, and VFV’s from broad market volatility and currency exposure.

Can I hold both ETFs together?
Absolutely. Holding both offers a balanced approach with income from VDY and growth/diversification from VFV.

Are these ETFs good for new investors?
Both ETFs are beginner-friendly due to their simplicity, diversification, and low fees, though VFV may appeal more to growth-focused investors, and VDY to income-focused ones.

Investors interested in buying ETFs commission-free can open an account with Questrade to start investing efficiently and affordably. Check out our full guide on how to buy stocks in Canada.

Disclaimer: The information in this article is for educational purposes and should not be taken as personalized financial advice. Both VDY and VFV are solid ETFs, but it’s important to do your own research (as we have with sources like Vanguard Canada) and consider your unique financial situation or consult a financial advisor before making investment decisions. Investing in ETFs carries risks including possible loss of principal – always ensure any investment aligns with your objectives and risk tolerance.

Last updated: June 5, 2026