Dividend growth in international markets is expected to be impressive this year, a theme that could benefit an array of exchange traded funds, including the Vanguard International High Dividend Yield ETF (NasdaqGM: VYMI).
An easy way of looking at the Vanguard International High Dividend Yield ETF is that it is the international answer to the wildly popular Vanguard High Dividend Yield ETF (NYSEArca: VYM), one of the largest U.S. dividend ETFs.
Ex-U.S. developed market dividend payers often feature larger yields than their U.S. counterparts, an assertion proven by comparing large- and mega-cap dividend stocks from familiar dividend sectors such as consumer staples, energy, financial services and telecommunications.
Low interest rates in the U.S. have sent investors flocking to dividend stocks and exchange traded funds in recent years. With central banks throughout the developed world paring rates and engaging in monetary easing, government bond yields are falling, giving investors good reason to consider international dividend ETFs.
“VYMI tracks the FTSE All-World ex US High Dividend Yield Index. It less than two years old, but that has not stopped this Vanguard ETF from hauling in almost $840 million in assets under management,” reports InvestorPlace. “The 2018 opportunity set with VYMI is two-fold. First, as mentioned earlier, international stocks are attractively valued compared to U.S. equities. Second, international dividend payers typically yield more than equivalent domestic fare, providing investors with added income.”
The forecast for dividend growth in 2018 underscores potential advantages with an ETF like VYMI.
“Emerging markets are projected to outperform developed markets in dividend growth. Among emerging markets, the Americas is expected to lead (17 percent), followed by Asia (12 percent) and EMEA (12 percent). The Eurozone is expected to lead in developed markets (15 percent), followed by APAC (10 percent),” according to Markit.
VYMI allocates 18.7% of its weight to emerging markets and 54.6% to European stocks. The ETF charges 0.32% per year, or $32 on a $10,000 investment, making it cheaper than 74% of competing strategies, according to issuer data.
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