VYMI ETF Review – Vanguard International High Dividend Yield ETF

International investing for dividends through the VYMI ETF

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

First of all, VYMI is the stock symbol for the Vanguard International High Dividend Yield exchange-traded fund.  Furthermore, VYMI stock trades on the NASDAQ stock exchange.

Let’s get started with a few highlights from todays article…

VYMI ETF Review: Key Takeaways

1. VYMI is a relatively new ETF offering from Vanguard having 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 held 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 of all, I wrote an article about building a Vanguard 3 fund ETF portfolio paying dividends.  Furthermore, in that article, I suggested the VYMI ETF be 1 of those 3 funds. 

Vanguard 3 Fund Portfolio Paying Dividends

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

Investing money in these 3 funds is a great way to build wealth for retirement.  And it should come as no surprise that 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 to go 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.

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

What Is An ETF?

First of all, an ETF is a collection of securities, such as stocks.  An ETF tracks 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 that are characterized by 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 own 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.

The 10 largest holdings comprise about 16% of the fund’s investments.  So, by looking at the top 10, we can get a pretty good feel for the overall type of investment holdings in this portfolio of stocks.

VYMI holdings – top 10:

Rank Dividend Stock % of Fund
1 Taiwan Semiconductor Manufacturing 4.4
2 Novartis AG 2.0
3 Toyota Motor Corp 1.8
4 Royal Bank of Canada 1.1
5 Commonwealth Bank of Australia 1.1
6 Siemens AG 1.1
7 Sanofi 1.0
8 Total SA 1.0
9 Toronto Dominion Bank 1.0
10 Allianz SE 1.0

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

VYMI Dividend & VYMI Dividend Yield

During last year, the VYMI dividend was $1.96 per share.  At the recent VYMI stock price, this dividend payout translates to a 3.1% dividend yield.

The VYMI dividend yield is pretty nice from my perspective.  It is right 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 looking at the VYMI dividend history and VYMI dividend growth rate.

VYMI Dividend History

Reviewing a dividend fund’s history should provide some 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 take 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 a consistent cash payout each quarter, the VYMI ETF does not provide that.  So we will look at dividend history on an annual basis.

VYMI dividend history:

Year Dividend per Share
2016$1.36
2017$2.15
2018$2.42
2019$2.68
2020$1.96

The VYMI ETF started operation on February 25, 2016.  So, the first full year of VYMI dividend payments was 2017.

This means we have a short dividend history to evaluate. Regardless, let’s discuss the facts as we know them…

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, as we can see, the dividend payout rate decreased in 2020.

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, dividends grow annually.  But, it is not a guarantee.

So, I believe we are seeing 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 reducing company profits. Finally, those reduced profits flowed directly to lower dividends.

Only time will tell us if we get a dividend recovery. In future years. I hope so!

VYMI ETF Total Return

According to Vanguard’s website, the ETF has returned an average of 8.1% per year since its inception in 2016.

Again, we have little historical data to go on.  But for a highly diversified all international stock ETF with more than a 3%+ dividend yield. 8%+ annual total returns over the long-run look like a reasonable case for investment value to me.

Especially given that 2020 was a tough year. For stocks of non-U.S. companies.

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 just .27%.  In other words, if you have a balance of $100 in VYMI stock for the year, Vanguard will charge you only 27 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.  It is important to keep investment costs as low as possible.

Vanguard ETF’s have low expense ratios.  Combine that with zero commissions and you have an excellent way to keep your investment costs to a minimum.

VYMI ETF Minimum Investment Requirements

An investor has to buy at least 1 share in an ETF to get started investing.  This means you can get started investing in VYMI stock for about $65.  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.  You just need the discipline to do so.

How To Turn $65 in $5,000

VYMI ETF Review

Through the magic of compound interest, $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?  Now, you might say that $5,000 doesn’t sound like much money.

On the other hand, if you don’t 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

There are other options 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 5 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:  In the past, I invested in both of them.

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

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

First of all, 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

Vanguard International High Dividend Yield ETF

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 a passive investment that keeps 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 a dividend stock ETFs versus individual stocks? It is that 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:

  • VYMI dividend yield of more than 3%+
  • Over a short history, dividend growth has not materialized
  • 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 total returns of 8-10%

More Reading On Dividend Investing

My Favorite Dividend Investing & Personal Finance Resources

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

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

Webull zero-commission online stock trading
Manage your investments with 1 integrated platform from M1 Finance
See your total financial picture in 1 place using Personal Capital

Disclosure & Disclaimer: I am not a licensed investment adviser, financial adviser, or tax professional. And I am not providing you with individual investment advice, financial guidance, or tax counsel. Furthermore, this website’s only purpose is information & entertainment. And we are not liable for any losses suffered by any party because of information published on this blog.

I own the VYMI ETF

10 thoughts on “VYMI ETF Review – Vanguard International High Dividend Yield ETF”

  1. Hi Tom,

    I recently bought an international value ETF, and may add this one to my holdings. My only concern is that, as I understand it, the dividends are not “qualified dividends” and therefore taxed higher than those of US companies. But the higher yield helps make up for that.

    Cheers!
    Miguel

    • Hi Miguel. Taxes are far from my strong suit. However, I would think that the international stocks held in most diversified ETFs would be a mix of qualified and non-qualified. It would depend on the tax status of each specific holding. Tom

  2. As I find your article interesting, I am curious which investment houses would let me buy into it at $65 a month? Which would be better (maybe safer?), a traditional bank or a (federal) credit union?

    • Hi Shane. Actually you would need a brokerage account to trade an ETF. Options like M1 Finance and Webull are both good options to allow you to buy 1 share per month (about $65) with no commission cost to you. Tom

  3. Tom, nice job of getting this info out to us investors! I’ve accumulated a substantial holing in Vanguards mutual funds since the early 90’s. I was a big fan of Bob Brinker, a finance radio show host of the program called MoneyTalk that aired every Saturday back in the day. He also put out a publication (via old school papper) called Market Timer. I recently opened a Robinhood brokerage account and have been researching and buying etf’s. Your article has helped affirm that I need to include VYMI in my portfolio without any doubt!

    • Hi Scott. Your comment definitely hits home because my Dad (now in his 90s) is a huge fan of Bob Brinker. And he loved that Saturday afternoon radio show you reference. I don’t follow Brinker as much but I know my brother and Dad still do through the Market Timer newsletter. Brinker is well-rounded, but he’s a bit more of a market-timer for my taste. I just try to buy and hold dividend stocks for the long-term regardless of where the market might go. But Brinker’s insights are always interesting for sure. Glad you enjoyed the article. Thanks for leaving your thoughts. Tom

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