Markets outside the United States, both developed and emerging, offer income investors compelling opportunities to find dividend growth and higher yields than equivalent U.S. stocks. Exchange-traded funds increase the accessibility of international dividend stocks.
VYMI tracks the FTSE All-World ex US High Dividend Yield Index and holds 884 stocks, good for one of the largest rosters among all international dividend ETFs. The fund has rapidly established a following with investors, garnering $708.1 million in assets under management in just under two years on the market.
A Yield Play
On a trailing 12-month basis, VYMI yields around 3.2 percent, about 80 basis points above the dividend yield on the MSCI ACWI ex USA Index.
VYMI's geographic exposure is extensive, including a 19 percent allocation to emerging markets, but the UK and Switzerland combine for 26.1 percent of the ETF's weight. Those are two of the steadier ex-US dividend growth markets. Australia, one of the highest-yielding developed markets, and Canada combine for over 15 percent of VYMI's weight.
Currency Risk
“This fund has exposure to multiple currencies from both developed and emerging markets,” said Morningstar. “Fluctuations between the U.S. dollar and these currencies can be an additional source of volatility. Like many of its peers, this fund does not take action to hedge this currency risk. Over long time periods, these fluctuations should wash out.”
VYMI isn't a currency hedged ETF and is benefiting from the lengthy U.S. dollar slump. After sliding 9.1 percent last year, the U.S. Dollar Index is lower by nearly 3.2 percent to start 2018.
VYMI's portfolio sports a price-to-earnings ratio of 14.2, implying a significant discount to the S&P 500. The ETF's holdings have a median market value of $52 billion.
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