With the S&P 500 reaching yet another all-time high recently, many stocks and ETFs feel expensive right now. However, there are excellent opportunities for long-term investors if you know where to look.
In the world of dividend stocks, there are still some great places to put money to work, and that’s especially true when it comes to international dividend stocks. That’s why the Vanguard International High Dividend Yield ETF (NASDAQ: VYMI) deserves a second look, even though its shares are near their own all-time high.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
As the name suggests, the Vanguard International High Dividend Yield ETF tracks an index of stocks based outside of the United States that pay above-average dividends. It has a 0.17% expense ratio, which is solid for a specialized index fund like this — especially because many of the stocks it owns are only listed on foreign stock exchanges.
This is a broad index with exposure to both emerging and developed markets worldwide. The fund holds over 1,500 stocks, most of which are larger companies. Although it’s a weighted index, meaning larger companies account for more of the assets, it isn’t nearly as top-heavy as an S&P 500 index fund. In fact, no single stock makes up more than 1.8% of the portfolio.
Speaking of the stocks, don’t think that just because this is an international stock ETF that it’s a bunch of companies you’ve never heard of. Top holdings include Novartis (NYSE: NVS), Nestle (OTC: NSRGY), and Toyota (NYSE: TM), just to name a few.
Despite being near an all-time high, you might be surprised by how much of a bargain this ETF is. The average stock in the portfolio trades for just 13.5 times earnings and is growing those earnings at an average rate of 12.8% annually. Meanwhile, the average stock in the U.S.-focused Vanguard High Dividend Yield ETF (NYSEMKT: VYM) has a P/E ratio of more than 20 and a slower earnings growth rate of 11.6%. VYM-Vanguard High Dividend Yield ETF | Vanguard
To be sure, there are some risks associated with investing in international stocks, such as currency fluctuations and geopolitical headwinds, but this ETF trades for a massive discount even with those things in mind. At the current price, the Vanguard International High Dividend Yield ETF has a roughly 3% dividend yield and could be an excellent addition to your portfolio for diversification, income, and total return potential.
