VYMI’s “selection universe starts with large- and mid-cap stocks that are part of the FTSE All-World ex US Index. The exchange-traded fund’s index ranks large- and mid-cap stocks by their expected dividend yield over the next 12 months and selects those that represent the higher-yielding half by market value,” according to Morningstar. “Stocks that make the cut are weighted by market cap, which emphasizes companies that are large, stable, and less likely to be in financial distress. This increases the likelihood of holding stocks that can maintain or grow their dividend payments in the future.”
VYMI holds just over 880 stocks, 19% of which are from emerging markets. Europe accounts for just over 54% of the ETF’s weight. Over 40 countries are represented in the ETF with the U.K. and Switzerland combining for 26.1% of VYMI’s geographic exposure.
“Alternatively, high yields can stem from stocks with poor prospects and depressed prices,” said Morningstar. “But this fund’s broad diversification can help mitigate these stock-specific risks as it is one of the best diversified in the foreign large-value Morningstar Category. Additionally, the emphasis on large mature firms reduces the fund’s allocation to those likely to be in severe distress.”
For more on smart beta ETFs, visit our Smart Beta Channel.