The Vanguard Australian Shares Index ETF (ASX: VAS) is an exchange-traded fund (ETF) with a history of paying dividends to investors. 

An ETF invests in a group of businesses. Through the ETF, investors can access the capital growth of those companies. The ETF also acts as a conduit for the dividend income that it receives from its holdings.

When companies in the portfolio have a relatively high dividend yield, that leads to the ETF itself having a higher yield too.

And with the Australian share market known for generous dividends, let's have a look at the VAS ETF's dividend yield.

Vanguard Australian Shares Index ETF dividend yield

Every month, Vanguard gives investors an update on the fund's performance, dividend yield, holding allocations and so on.

In its update released last month, Vanguard disclosed that the VAS ETF's dividend yield at the end of August was 3.5%, excluding franking credits.

The fund tracks the S&P/ASX 300 Index (ASX: XKO), an index of 300 of the largest businesses on the ASX.

As mentioned, the fund's yield is boosted by ASX companies with relatively higher dividend yields. These include BHP Group Ltd (ASX: BHP), National Australia Bank Ltd (ASX: NAB), Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ) and Woodside Energy Group Ltd (ASX: WDS).

Others with lower yields, such as CSL Ltd (ASX: CSL), Xero Ltd (ASX: XRO), and WiseTech Global Ltd (ASX: WTC), push down the overall average.

The average yield of all these companies, weighted to their size in the portfolio, decides the overall dividend yield of the Vanguard Australian Shares Index ETF.

Why has the VAS ETF distribution been stronger than the dividend yield?

Investors in Vanguard Australian Shares Index ETF units can receive bigger distributions than what the dividend yield suggests.

ETFs must also distribute any capital gains that are made on sold shares within the fund where a profit is made. Therefore, an ETF's passive income can be made up of dividends, capital gains and other small miscellaneous income items.

According to Vanguard, the distribution return over the past year amounts to 4.26% in percentage terms. Over the past 10 years, the distribution return has been an average of approximately 4.5% per annum.

Foolish takeaway

With its high-yielding holdings, the VAS ETF does indeed pay a decent dividend. Due to the number of different holdings it owns, it also offers a certain level of diversification.