With a paltry dividend yield of 1.15%, the S&P 500 falls short in the income department, but investors can do better with international stocks.
Just look at the Vanguard International High Dividend Yield Index Fund ETF Shares (VYMI 0.19%). As the international counterpart to the popular Vanguard High Dividend Yield ETF (VYM 0.27%), this exchange-traded fund (ETF) yields a tidy 3.72%.
Yes, there are international ETFs that out-yield this Vanguard fund, but yield alone isn't a reason to buy an ETF.
This dividend ETF combines yield and the potential for payout growth. Image source: Getty Images
In fact, how this ETF sources its dividend durability and diversification properties is among its primary selling points, underscoring why the fund is one that buy-and-hold investors can trust.
This ETF avoids yield traps
Dividend investors have nothing without dependability. However, as seductive as high-yielding stocks are, some are risky, and that's true of international markets, too. Some companies with high dividend yields may be burdened by those payouts, making them yield traps.
This Vanguard ETF takes steps to avoid those dubious companies. Its underlying index absorbs just half the dividend payers in its selection universe. That weeds out some of the names that could eventually result in cuts or suspensions of payouts. Additionally, this fund doesn't weigh components by dividend yield. Instead, it weighs holdings by market capitalization. It's a basic weighting methodology, but one that provides some degree of safety by pushing larger companies, which can sustain and grow dividends, higher up the ladder.
When it comes to dividend investing, safety is always a positive aspect. So is payout growth. Many domestic dividend payers check that box, but investors shouldn't overlook the payout growth potency of some international markets. For example, European dividends have been on an impressive multi-year streak of climbing higher, and that trend is expected to continue next year.
NASDAQ: VYMI
Key Data Points
Likewise, Japan is climbing the ranks of viable dividend growth markets. By some estimates, nearly two dozen Japanese companies doubled payouts in 2025. These factors are relevant to investors considering this Vanguard ETF because Japan is the fund's most significant country weight, at 14.3%, while Europe is the top regional exposure, at 43.7%.
Diversification is back in style
From late 2014 through last year, domestic stocks trounced international rivals, giving investors little reason to venture outside the U.S. That means many were unprepared when the scenario reversed at the start of 2025, while proving durable over the course of the year.
That is to say, investors who were diversified entering 2025 were rewarded. Some experts argue that it's unsafe to skip out on international diversification and that this move amounts to no more than a gamble. This Vanguard ETF makes it easy to remake a portfolio's geographic composition.
Plus, the fund itself is diversified. It is home to 1,534 stocks, none of which command more than 1.65% of the roster. That indicates that single-stock risk is limited, and these benefits come with a reasonable annual fee of 0.17%, or $17 on a $10,000 investment.
