3 Vanguard ETFs For International Income
Vanguard ETFs offer some compelling opportunities for international income
Vanguard is the second-largest U.S. issuer of exchange-traded funds (ETFs), so it is fair to say plenty of investors know about the fund giant and that plenty are also clients of the firm. It is also accurate to say that many investors are aware of the firm’s U.S.-focused index funds and ETFs, such as the Vanguard 500 Index Fund (NYSEARCA:VOO) and the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG).
However, Pennsylvania-based Vanguard also sponsors some behemoth international ETFs. For example, the Vanguard Emerging Markets Stock Index Fd (NYSEARCA:VWO) is one of the largest Vanguard ETFs and is the largest emerging-markets ETF from any sponsor.
Additionally, plenty of investors looking for ex-U.S. international stocks turn to the Vanguard MSCI EAFE ETF (NYSEARCA:VEA). Among ETFs holding international stocks, VEA is one of the largest and one of 2017’s most prolific asset gathers.
In addition to the popular VEA and VWO, Vanguard’s offerings for ex-US include funds tracking international stocks and international bonds. Importantly, some of these funds are solid income ETFs at a time when investors are still scrambling to find extra yield.
Vanguard ETFs: Vanguard International Dividend Appreciation ETF (VIGI)
Expense ratio: 0.25%, or $25 on $10,000 investment.
Yield: 1.3%
The Vanguard International Dividend Appreciation ETF (NASDAQ:VIGI) is the international answer to the aforementioned VIG, the largest U.S. dividend ETF. Investors looking for the combination of diversity by way of international stocks and an income ETF would do well to consider VIGI.
VIGI is nearly 15 months old and at the end of April, this fund had over $415 million in assets under management, according to issuer data. That easily makes this Vanguard fund one of the most successful ETFs to have launched last year.
This Vanguard ETF holds 244 stocks and is a mix of developed and emerging-markets equities. Emerging markets account for almost 21% of VIGI’s roster. This new income ETF also devotes 45.5% of its weight to Europe, a notable trait for multiple reasons. First, when it comes to international stocks, Europe has proven to be a steady dividend destination. Second, U.S. stocks are richly valued, explaining why international stocks are capturing investors’ attention. Europe is among the most attractively valued regions in the world at the moment.
Vanguard ETFs: Vanguard Total International Bond ETF (BNDX)
Expense ratio: 0.12%
Yield: 1.8%
International bonds should be part of a complete income-generating portfolio, but many investors may be eschewing international bonds because they are hearing about paltry sovereign debt yields outside the U.S. While Treasury yields are not high, they are still higher than what investors will find on Eurozone or Japanese equivalents.
The Vanguard Total International Bond ETF (NASDAQ:BNDX) makes for a good addition to a lineup of income ETFs for conservative investors for multiple reasons. First, BNDX features a deep bench of more than 4,400 bonds hailing mostly from low-risk markets Japan, France and Germany. Those countries combine for about 42% of this Vanguard ETF’s weight.
Second, credit quality is not a concern with BNDX as about 81% of this Vanguard ETF’s holdings are rated AAA, AA or A. Third, BNDX also features a currency hedged mechanism, the only Vanguard ETF to do so, meaning there is added benefit for investors should the dollar strengthen against other developed market currencies.
Vanguard ETFs: Vanguard International High Yield Dividend ETF (VYMI)
Expense ratio: 0.32%
Yield: 2.7%
The Vanguard International High Dividend Yield ETF (NASDAQ:VYMI) is the international stocks’ answer to the Vanguard High Yield Dividend ETF (NYSEARCA:VYM), one of the largest US-focused dividend income ETFs.
The Vanguard International High Dividend Yield ETF debuted alongside the aforementioned VIGI and like that fund, VYMI has proven to be one of the most successful ETFs that debuted in 2016. VYMI now has $406.3 million in assets under management.
This Vanguard ETF tracks the FTSE All-World ex U.S. High Dividend Yield Index, giving investors exposure to a mix of developed and emerging markets. VYMI holds 932 stocks, 19% of which hail from developing economies. More than 54% are European names, which helps juice the yield angle here because European dividend-paying stocks typically sport higher yields than their U.S. equivalents.
VYMI’s holdings have a median market value of almost $47 billion, confirming that it is a large-cap income ETF.
Note: Todd Shriber is the author of this article. As of this writing, Todd owns shares of VWO.
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Category: ETFs
