VYMI ETF Review – Vanguard International High Dividend Yield ETF

This is a review of the Vanguard exchange-traded fund (ETF) also known as VYMI.

First, VYMI is the stock symbol for the Vanguard International High Dividend Yield exchange-traded fund.

Furthermore, VYMI stock trades on the NASDAQ stock exchange.

Finally, let’s start with a few highlights from today’s article…

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Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.

VYMI ETF Review: Key Takeaways

1. VYMI from Vanguard started trading in 2016.

2. The fund focuses on non-U.S.-based stocks that have above-average dividend yields.

3. It provides significant diversification, with more than 1,000 international stocks in the portfolio.

4. A convenient and low-cost way to invest in international stocks that pay dividends.

Next, a little background on why taking a closer look at VYMI is important…

Why Review The VYMI ETF?

First, I wrote an article about building a Vanguard 3 fund ETF portfolio paying dividends.  Furthermore, I suggested the VYMI ETF be 1 of those 3 funds in that article. 

Vanguard 3 Fund Portfolio Paying Dividends

As a quick refresher, here are the 3 funds in my version of the Vanguard 3 fund portfolio:

• High-Dividend Yield ETF (VYM)
• International High-Dividend Yield ETF (VYMI)
• Total Bond Market ETF (BND)

Investing money in these 3 funds is a great way to build wealth for retirement.  And my version of the Vanguard 3 fund portfolio has a strong focus on dividends.

The 3-fund approach is also a solid strategy for beginners.  Furthermore, it is a good way for anyone with a long-term investment time horizon.  Finally, a Vanguard 3 fund portfolio is simple to set up and a stress-free way to invest.

I also have a personal reason for taking a closer look at Vanguard’s international dividend ETF.  I will get to that in a moment.

But now, let’s get on with our review of the Vanguard International High-Dividend Yield ETF.

What Is An ETF?

An ETF is a collection of securities, such as stocks.  Also, ETFs track an underlying index.

An ETF is traded on an exchange just like an individual stock.  So, the price of an ETF’s shares changes throughout the trading day.

Since an ETF is a collection of securities, it provides instant diversification.  This is especially important due to the challenges of investing internationally.

VYMI Stock ETF Tracks An Index

As our ETF definition mentions, ETFs track an underlying index.  Vanguard’s international dividend ETF tracks the FTSE All-World ex-US High Dividend Yield Index.

The FTSE All-World High Dividend Yield Index comprises stocks with higher-than-average dividend yields.  And it is based on the FTSE All-World Index.  It is part of the FTSE Global Equity Index Series.

VYMI ETF Overview

Let’s see what Vanguard says about its ETF.

Vanguard states that the VYMI ETF:

1. Seeks to track the performance of the FTSE All-World ex-US High Dividend Yield Index
2. Provides a convenient way to get exposure to international stocks that are expected to have above-average dividend yields

VYMI Holdings

VYMI holdings consist of more than 1,000 individual stocks providing dividend income.  That’s right; you get nearly 1,000 dividend stocks with one single purchase.

Diversification is high because the 10 largest holdings comprise a relatively small amount of the total portfolio.

So, by looking at some of the largest positions. An investor can get a pretty good feel for the overall type of investment holdings in this portfolio of stocks.

Next, let’s discuss some of the features and specifications of dividends paid by VYMI.

VYMI Dividend & VYMI Dividend Yield

The VYMI dividend yield is pretty nice from my perspective.  It is usually in my preferred dividend yield “sweet spot” of 3-5%.

International stocks tend to yield more than US stocks.  On the other hand, good U.S.-based dividend growth stocks tend to have higher and more consistent dividend growth.

Next, let’s check into that by discussing the VYMI dividend history and VYMI dividend growth rate.

VYMI Dividend History

Reviewing a dividend fund’s history provides insight into the consistency of cash flow we can expect by investing in the VYMI ETF.  And, more importantly, the growth of that cash flow.

You should note that VYMI stock pays dividends 4 times per year during the last month of each calendar quarter.  Furthermore, each quarterly payout is different.  The payout depends on which companies in the fund are paying their dividends and when.

If you require monthly dividends or a consistent cash payout each quarter, the VYMI ETF does not provide that.

VYMI Dividend Growth Rate

The fund’s first couple of years’ track record of dividend growth was very good.  On the other hand, when I first reviewed the fund in 2019, I was skeptical that the dividends would continue to grow so quickly.

And I was correct in having a cautious view. Because the dividend payout rate subsequently decreased.

Why would that be? Let me offer my opinion…

First of all, many non-U.S. companies use what is known as a constant payout ratio dividend policy. In this case, dividends are distributed to shareholders based on a specific portion of the company’s earnings or cash flow.

Therefore, the dividend distribution amount is directly proportional to the company’s earnings.  This method makes internal financing decisions from earnings or cash flow much easier.

On the other hand, an investor has less future certainty about the value of dividends to be received.  Since profits and cash flow will never be the same each year. Hopefully, the dividends grow annually.  But, it is not a guarantee.

So, I observed during 2020 the impact of a constant payout ratio dividend policy. It is at work with the ETF’s portfolio holdings.

This is likely a result of the recession caused by the global health crisis. And the impact it had on reducing company profits. Finally, those reduced profits flowed directly to lower dividends.

Fortunately, dividend payments recovered in 2021 and have been paying out nicely since then.

VYMI ETF Total Return

According to Vanguard’s website, the ETF returned an average of about 9% per year since its inception in 2016 through 2021.

For a highly diversified all-international stock ETF 9% annual total returns over the long-run look like a good case for investment value to me.

VYMI ETF Expense Ratio

Here is an area where ETFs in general and Vanguard specifically really shine.  That is the area of low investment management costs.

The VYMI ETF expense ratio is less than a quarter of 1 percent.  In other words, if you have a balance of $100 in VYMI stock for the year, Vanguard will charge you less than 25 cents.

Be sure to buy VYMI stock through a zero-commission broker like Webull or M1 Finance.   By doing so, the commission on the trade is free.

And I encourage you to use a zero-commission online broker.  Since it is important to keep investment costs as low as possible.

Vanguard ETFs have low expense ratios.  Combine that with zero commissions, and you can keep your investment costs to a minimum. Cost-efficient investing is one of many good investment rules to live by.

VYMI ETF Minimum Investment Requirements

An investor must buy at least 1 share in an ETF to start investing. Some brokers even allow the purchase of a fractional share.

This means you can start investing in VYMI without much money.  And add to that investment each month for a similar amount.

So, there should be no excuses.  You don’t need a lot of money to get started earning dividends from the VYMI ETF.  However, it would help if you had the discipline to do so.

Let’s assume you invest a small sum like $65…

How To Turn $65 in $5,000

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Through the magic of compounding, $65 per month invested in the VYMI ETF at a 10% investment return will net you more than $5,000 at the end of 5 years.

Wouldn’t it be nice to have $5,000?  You might say that $5,000 doesn’t sound like much money.

On the other hand, if you do not start saving and investing in 5 years, you won’t have anything.  I don’t even need my calculator to do that math!

What About DWX And PID

Other options exist for making money from dividends when investing in international dividend ETFs.  And many of the other funds have been in existence for a lot longer.

The 2 I am most familiar with are:

SPDR S&P International Dividend ETF (DWX)

Invesco International Dividend Achievers ETF (PID)

I think Vanguard’s international ETF is most similar to DWX.   But DWX has a much more concentrated portfolio.  Holding fewer stocks. By a wide margin.

PID is even more concentrated.  And PID has a lower dividend yield.  It focuses on “dividend achievers”.

Dividend achievers are international dividend-paying companies.  They have increased their dividends consistently over the past several years.

Vanguard’s ETF is also a lower-cost option.  Both DWX and PID have slightly higher expense ratios than VYMI.

In my opinion, I believe both DWX and PID are solid investment options.  Full disclosure: I invested in both of them in the past but no longer do so as I explain below.

As I said early on, I have a personal reason for reviewing the VYMI ETF.  What is it?

I sold my DWX and PID shares and consolidated the proceeds into Vanguard’s international dividend ETF.  Why would I do this?

First, Vanguard’s international dividend ETF did not exist when I built positions in PID and DWX.  But now that it is available, Vanguard’s ETF has several advantages for me:

• Lower management fees
• Greater diversification
• Portfolio simplification from 2 ETFs to just 1

Dividend ETFs vs. Individual Dividend Stocks

Next, let me discuss a few thoughts about choosing between stocks and funds…

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The main advantage of dividend ETFs versus individual stocks is the instant diversification an investor can have with a single purchase.  Furthermore, there is no need to spend time researching and selecting individual dividend stocks to invest in.

Finally, ETFs are passive investments that keep trading and investment costs low. I think these factors are an even more important consideration when investing outside of the US.

On the other hand, what is the primary disadvantage of dividend stock ETFs versus individual stocks? The ETF will contain some dividend stocks that may be poor investments.

With dozens or even hundreds of stocks included, not all of them will be a great company.  Nor will they all be high-performing individual investments.  You have to take the good with the not-so-good when investing in an ETF.

I own very few non-US-based individual stocks.  So, I prefer the diversification ETFs offer in this area. And VYMI is a solid option to get dividends from non-U.S.-based companies.

VYMI Fact Sheet & Summary

To wrap up, here is a brief VYMI fact sheet and summary from this article about the Vanguard International High Dividend ETF:

• Attractive dividend yield
• Modest dividend growth
• VYMI holdings are diversified among 1,000+ dividend stocks
• Low cost
• Low initial investment
• Over the long term, VYMI stock can be a great holding for solid total investment returns

More Reading On Dividend Investing

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My Favorite Dividend Investing & Personal Finance Resources

There are many great resources for do-it-yourself money managers and investors like you and me. And best of all, they are free to sign up for and use.

Here are several of my favorites. Representing different options for whatever fits your personal finance needs…

Author Bio, Disclosure, & Disclaimer: Please join me (Tom) as I try to achieve my goals, find my next place to live, and make the most of my money. However, I am not a licensed investment adviser, financial counselor, real estate agent, or tax professional. Instead, I’m a 50-something-year-old, early retired CPA, finance professional, and business school teacher with 40+ years of DIY dividend investing experience. I’m here only to share my thoughts about essential topics for success. As a result, nothing published on this site should be considered individual investment, financial, tax, or real estate advice. This site’s only purpose is general information & entertainment. Thus, neither I nor Dividends Diversify can be held liable for losses suffered by any party because of the information published on this website. Finally, all written content is the property of Dividends Diversify LLC. Unauthorized publication elsewhere is strictly prohibited.

I own the VYMI ETF