Dividend investors looking to add some international income to their portfolios have plenty of exchange traded funds to consider. Those also looking for a low-fee idea can consider the Vanguard International Dividend Appreciation ETF (NasdaqGM: VIGI).
VIGI, which debuted in March 2016, is the international answer to the popular Vanguard Dividend Appreciation ETF (NYSEArca: VIG), the largest U.S. dividend ETF.
VIGI, one of just two new ETFs launched by Vanguard last year, “emphasizes stocks exhibiting dividend growth and seeks to track the Nasdaq International Dividend Achievers Select Index, which comprises more than 200 all-cap developed and emerging markets stocks with a track record of increasing annual dividend payments,” according to Vanguard.
Although VIGI is among the newest Vanguard ETFs, the fund has quickly developed a following among dividend investors.
“Not surprisingly, VIGI is off to a fast start. This Vanguard dividend ETF had nearly $748 million in assets under management at the end of the third quarter. Seasoned income investors know that international dividend payers often yield more than the comparable U.S. stocks, a point that underscores VIGI’s utility in income-generating portfolios,” reports InvestorPlace.
VIGI holds nearly 250 stocks and its top 10 holdings represent almost a third of the ETF’s total weight. The ETF’s components have a median market value of $52.7 billion with earnings multiples indicating VIGI trades at a discount to the S&P 500.
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VIGI allocates 15.5% of its weight to Switzerland with Canada and Japan combining for almost a quarter of the fund’s weight. India and France combine for just over 18%. Emerging markets represent 22.5% of VIGI’s portfolio.
“Many foreign stocks tie their dividend payments to earnings,” said Morningstar in a recent note. “Therefore, companies that have a history of increasing their dividend payments are also likely to be those that have been consistently growing profitably. This fund’s return on invested capital comes in at 17.3%, compared with 12.5% for the MSCI ACWI ex-USA Growth Index. It also lands in the top quintile of the foreign large-growth Morningstar Category.”
VIGI yields 1.9%, indicating this is more of a dividend growth or quality play than it is a high-yield fund. The ETF is up about 22% year-to-date.
VIGI charges 0.25% per year, or $25 on a $10,000 investment, making cheaper than 76% of competing strategies, according to issuer data.
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