with a trivial dividend yield is 1.15%, S&P 500 Index It falls short on the income front, but investors can get better performance with international stocks.
Just look Vanguard International High Dividend Yield Index Fund ETF Stock (NASDAQ: VYMI). Popular as an international peer Vanguard High Dividend Yield ETF (NYSE: VYM)this exchange-traded fund (ETF) has a yield of as high as 3.72%.
Yes, some international ETFs have yields that exceed those of Vanguard funds, but yield alone is not a reason to buy an ETF.
In fact, how this ETF achieves dividend persistence and diversification attributes is one of its key selling points, which highlights why this fund is one that buy-and-hold investors can trust.
Without reliability, dividend investors have nothing. However, as tempting as high-yielding stocks are, some stocks also carry risks, as do international markets. Some companies with high dividend yields may be burdened with these expenses, making them yield trap.
Vanguard ETFs take steps to avoid companies that look questionable. Its underlying index captures only half of the dividend payers in its universe of choices. This eliminates some names that could ultimately lead to spending cuts or suspensions. Additionally, the fund does not measure individual components based on dividend yield. Instead, it measures open interest by market capitalization. This is a basic weighting approach, but provides a level of safety by pushing larger companies that are able to maintain and grow their dividends to higher positions.
When it comes to dividend investing, safety is always a positive. So does spending growth. Many domestic dividend payers check this box, but investors shouldn’t overlook the dividend growth potential in some international markets. For example, European dividends have been on an impressive streak of climbs for several years, and this trend is expected to continue next year.
Likewise, Japan is emerging as a viable dividend growth market. It is estimated that nearly 20 Japanese companies will double their dividends by 2025. These factors are relevant for investors considering this Vanguard ETF, as Japan is the fund’s most important country weighting at 14.3%, while Europe is the largest regional exposure at 43.7%.
