Investing in dividends has skyrocketed in popularity over the last several decades because it ensures a steady flow of income for shareholders during the dividend. In particular, more senior investors searching for stable income utilize dividends to extract value from their portfolio while maintaining equity for the sake of capital appreciation. In a similar vein, many businesses provide dividends with the goal of luring long-term investors to their shares rather than speculators interested only in the short term.
Exchange-traded funds provide international investors access to hundreds of different investment alternatives, but there are relatively few income-focused options. In addition, many overseas investors utilize either active strategies centered on capitalizing on short- to medium-term trends or passive strategies centered on capital appreciation and diversification over the long term. Because of these factors, many people who invest in income have limited alternatives for their money outside the United States.
Vanguard’s New Funds
Vanguard, one of the largest providers of mutual funds and the second largest provider of exchange-traded funds in the world, stated in March 2016 that it would launch international versions of its two most popular exchange-traded funds (ETFs): ARCA: VYM and ARCA: VIG.
The new worldwide dividend ETFs is a pioneer in low-cost index funds. In addition to having low expense ratios, these funds provide diversified exposure to hundreds of thousands of different stocks originating from established markets and developing countries all over the globe. A significant benefit is worldwide dividend portfolios have historically had greater dividend yields than U.S.-only exposure. U.S. stocks tend to have lower yields than other equity markets.
Taking a Closer Look
The cost ratio of Vanguard IHD Yield Index Fund will be 0.28%, and the fund's primary investment emphasis will be on purchasing high-dividend equities in both developing and established economies across the globe. The ETF uses FTSE All-World ex-US HDY Index as its benchmark, and it owns more than 1,000 of the highest-yielding large- and mid-cap companies across these countries. This provides an excellent combination for income investors aiming to maximize the number of dividends they get.
The cost ratio of the Vanguard International Dividend Appreciation Index Fund is 0.20%, and the fund's primary investment objective is to seek businesses that have dividend yields that are increasing over time. The ETF uses the NASDAQ International Dividend Achievers Select index as its benchmark. It invests in more than 400 all-cap stocks that have a long history of increasing dividend payments. These stocks can be found in both developing and developed markets, and the ETF places an additional emphasis on stable earnings and low debt loads. The Vanguard Equity Index Group, one of the world's most prominent and biggest index managers, is in charge of managing both of these funds.
Alternatives for Investors
Investors do not just have Vanguard's new funds to consider when looking for foreign dividend ETFs; other choices already on the market provide potential. In each of these instances, the funds had higher cost ratios, but with the debut of Vanguard, those numbers may become more reasonable. Before choosing an international exchange-traded fund (ETF), investors should carefully analyze all of their available alternatives. The following are some alternatives that are already being traded:
SPDR S&P International Dividend ETF (ARCA: DWX)
ARCA: DWX has an expense ratio of 0.45% and 97 stock holdings from countries all over the globe. It follows the benchmark index that the S&P maintains.
iShares International Select Dividend ETF (ARCA: IDV)
ARCA: IDV has a portfolio of 100 holdings, an expense ratio of 0.49%, and follows high dividend-paying stocks in developed markets outside the United States.
Vanguard ETF Dividend Yields
ETFs are often evaluated based on their dividend payments according to a 30-day SEC yield. This is a standardized yield produced by the Securities and Exchange Commission (SEC) to make fund comparisons as objectively as possible. The 30-day simple exponential moving average yield is a yield that is derived using the most recent 30-day period and indicates the investment income received by a fund after subtracting the fund's costs.
Over seventy of Vanguard's exchange-traded funds (ETFs) are expected to distribute dividends on a quarterly or yearly basis as of September 2021. A few funds within Vanguard distribute dividends every month; however, this is not very typical. As of September 2021, the 30-day yield on Vanguard ETFs may fluctuate anywhere from 0.18% to 3.88%, according to the SEC.
Conclusion
Over the last several decades, dividend investors have grown increasingly popular, especially in circumstances in which interest rates are low. When it comes to international dividend ETFs, foreign investors have a few different choices to choose from; however, Vanguard's funds will give investors intriguing alternatives. The cost ratios of Vanguard's foreign dividend ETFs are cheaper than those of many similar funds, and there are two different varieties available for investors to choose from.
