Is the US still the best place in the world for Americans to invest? Recent research from Vanguard shows that international stocks could provide strong opportunities over the next few years.
The company’s 2026 economic and market outlook states that “ex-US equities” – international stocks that do not include the US – are expected to deliver a 4.9% to 6.9% average annual return for the next 10 years, while US stocks are expected to deliver only a 4% to 5% return. Another report from Vanguard in June predicted that some of the best long-term gains from the artificial intelligence (AI) boom may go not to AI stocks, but to “developed markets outside the US” as global companies use AI to improve their operations.
Although Vanguard’s research does not recommend any specific stocks or exchange-traded funds (ETFs), if you agree with this forecast, buying international dividend stocks may be a good strategy. that’s because international stock Companies paying high dividends come from developed markets such as Japan, Canada and Western Europe.
Vanguard International High Dividend Yield ETF (VYMI 0.40%) and this Vanguard International Dividend Appreciation ETF (Wiggy 1.06%) There are two Vanguard ETFs that offer investments in international dividend stocks. Both have portfolios that include the types of stocks that are expected to outperform over the next few years, according to Vanguard Research.
But over the last 10 years, Vanguard International High Dividend Yield ETF has delivered a total return of 188.1%, outperforming other funds:
VYMI Total Return Value by data YCharts
Let’s look at these two Vanguard International ETFs and see which might be a better choice for your investment dollars.
Vanguard International High Dividend Yield ETF (VYMI): 1,578 stocks, 10-year return of 11.2% annualized
The recent performance of Vanguard International High Dividend Yield ETF has been quite good. At recent prices, it has delivered a total return of 24% in the last year, which is better than last year S&P 500 Index.
Vanguard International High Dividend Yield ETF
today’s change
(-0.40%) $-0.40
current price
$99.57
key data points
Om
$21B
dividend yield
3.62%
expense ratio
0.07%
Top Holdings
hsba.l
1.74%
ropsw
1.59%
nov.d.s
1.56%
On a longer-term horizon, the fund’s past performance is less strong, but still solid. This international ETF has delivered annual total returns (by net asset value) of 22% over the last three years, 12.9% over the last five years and 11.2% over the last 10 years. It charges a low expense ratio of 0.07%.
Can this fund be a good option for the future? It has a diversified portfolio of 1,578 global stocks. If you want developed market stocks, this fund can provide that exposure. Its portfolio consists of 43.7% European stocks, 23.8% Pacific region stocks and 22.8% only. emerging markets.
The top five countries of this ETF included in the portfolio are Japan (11.5% of the fund), United Kingdom (11%), Canada (8.9%), Switzerland (7.5%), and Australia (7.3%). The fund’s top 10 stock holdings include international banks HSBC Holdings (HSBC 1.20%)pharmaceutical giants like Roche Holding (RHHBY 0.79%)energy chief shell (shell +0.30%)and australian mining company BHP Group (BHP 2.41%).
If you’re worried that US tech stocks have become overheated, this fund can put your money to work across different parts of the global economy. Such companies tend to be well-established and financially strong, which enables them to return lots of cash to shareholders. This dividend ETF has provided a dividend yield of 3.68% over the last 12 months, which is higher than many best dividend index funds. And the price-to-earnings (P/E) ratio of this fund is 14.02, making it much cheaper than the S&P 500 Index earnings multiple of 25.37.
Image Source: Getty Images.
Vanguard International Dividend Appreciation ETF (VIGI): 343 stocks, 10-year return of 7.98% annualized
Another way to invest in international dividend stocks is to use the Vanguard International Dividend Appreciation ETF. This fund uses a different approach. Instead of over 1,500 stocks, it has only 343 stocks in its portfolio. The fund is even more focused on developed markets, with only 5.1% of its assets invested in emerging market stocks. It charges a low 0.07% expense ratio, similar to other Vanguard funds.
Among the top 10 stock holdings of the Vanguard International Dividend Appreciation ETF are names similar to VYMI. like owns international banks Royal Bank of Canada (ry 1.58%) And Mitsubishi UFJ Financial Group (MUFG 0.99%)Pharma stocks like Roche Holding and novartis (NVS 1.18%)and German technology and industrial companies SAP (SAP 3.29%) And schneider electric (SBGSY 0.77%).
However, this fund has not performed as well as other Vanguard International ETFs. Vanguard International Dividend Appreciation ETF has delivered average annual returns of 8% over the last year, 10.8% over the last three years, 4.6% over the last five years and 7.98% over the last 10 years. It has underperformed the S&P 500 in all of those time periods.
Vanguard Whitehall Funds – Vanguard International Dividend Appreciation ETF
today’s change
(-1.06%) $-1.01
current price
$94.26
key data points
Om
$9.2B
dividend yield
2.11%
expense ratio
0.07%
Top Holdings
RYTO
4.52%
8306.t
3.98%
nesnsw
3.83%
This dividend ETF also lags the dividend yield of other funds, with a 12-month trailing yield of 2.13%. And Vanguard International Dividend Appreciation ETF has a more expensive P/E ratio at 19.33.
One potential risk of this fund is that its portfolio is less diversified than other Vanguard ETFs. The Vanguard International Dividend Appreciation ETF has approximately 80% of its portfolio invested in its top five markets:
- Japan: 30.9% of the fund
- Canada: 23%
- Switzerland: 14.4%
- Germany: 5.5%
- United Kingdom: 5.6%
This is a highly concentrated bet on only a few countries. If any of those countries experience an economic recession or their currency weakens against the US dollar, it could be bad news for US investors in this fund.
Why buy VYMI vs VIGI?
Recent Vanguard research suggests that developed markets outside the US may outperform over the next few years; Both funds fit that strategy. And if you’re worried about high valuation of technology companiesThese international dividend stock ETFs hold value stocks, not growth stocks. The companies represented in these funds are involved in different parts of the global economy that are less directly linked to the AI boom.
But the Vanguard International High Dividend Yield ETF is more diversified, it has a lower P/E ratio, and it has a track record of paying a higher dividend yield over the last 12 months. I believe this fund is a better choice for most long-term investors who want high-yield dividends Stocks outside the US market.