Disclaimer: The following is for informational purposes only and not financial advice. Always do your own due diligence. I am not a licensed advisor.

Best International Dividend ETF: A Smart Way to Diversify Your Portfolio

As global markets continue to evolve, investors are looking for opportunities beyond their domestic borders to increase returns and reduce risks. One of the most effective ways to tap into the growing potential of international markets is through International Dividend ETFs. These funds offer exposure to high-quality, dividend-paying companies worldwide while allowing you to enjoy passive income.

But, with so many choices available, how can you determine which international dividend ETF will work best for you? Let’s dive into some top picks and compare them based on their strategies, yields, and growth potential.

Why Consider International Dividend ETFs?

International stocks have historically traded at lower valuations compared to U.S. stocks, making them an attractive option for long-term investors. While U.S. stocks have been on a strong run for years, valuations are currently at a significant premium, leading many to question whether it might be time to look outside the U.S.

Investing in International Dividend ETFs allows you to access companies in various sectors across the globe, which can be especially appealing when U.S. stocks are facing headwinds. Moreover, many international markets provide higher yields than U.S.-based companies, giving investors a solid income stream in the form of dividends.

Let’s take a look at a few of the best international dividend ETFs that could help diversify your portfolio.

Vanguard International High Dividend Yield ETF (VYMI)

First up is the Vanguard International High Dividend Yield ETF (VYMI). Known for its strong dividend focus, this ETF targets high-yielding stocks across developed and emerging markets.

Why VYMI?

Dividend Yield: Currently around 4.51%, VYMI is an appealing choice for investors seeking income.
Expense Ratio: It charges a reasonable 0.17%, making it one of the more cost-effective options in the international dividend space.
Top Holdings: Includes well-known companies such as Toyota, Nestlé, Novartis, and Shell, with significant allocations in Japan, the U.K., and Canada.
Total Return: Over the last 5 years, VYMI has provided an average return of about 99.92%, making it a solid performer over the long term.

This ETF is a great option for investors looking for a mix of income and growth, offering both solid dividends and capital appreciation potential.

Schwab International Dividend Equity ETF (SCHY)

Next is the Schwab International Dividend Equity ETF (SCHY), which focuses on high-quality international dividend growth stocks.

Why SCHY?

Dividend Yield: It offers a yield of 4.35%, which is competitive in the international dividend space.
Expense Ratio: At just 0.08%, it’s one of the lowest-cost options for international dividend investors.
Dividend Growth: SCHY has demonstrated strong growth in dividends, averaging about 10% since inception.
Top Holdings: SCHY includes companies such as British American Tobacco, Imperial Brands, and Total Energies, with a significant portion allocated to the U.K., France, and Australia.

If you’re looking for low-cost international dividend growth exposure, SCHY is a fantastic option, especially for long-term investors.

iShares International Select Dividend ETF (IDV)

The iShares International Select Dividend ETF (IDV) is another great option for investors seeking exposure to international dividend stocks. It’s known for its focus on dividend consistency and sustainability.

Why IDV?

Dividend Yield: Offers a strong yield of 5.9%, making it an excellent choice for income investors.
Expense Ratio: It charges an expense ratio of 0.49%, which is on the higher side, but justified by its dividend-focused strategy.
Top Holdings: The fund holds companies like British American Tobacco, Imperial Brands, and Enel, with exposure to the U.K., Italy, Spain, and Canada.
5-Year Total Return: Over the past 5 years, IDV has averaged a total return of 6.62%, driven primarily by its dividends.

IDV is a great option for those looking to prioritize stable dividends from developed markets. With a track record dating back to 2007, it’s a solid pick for long-term dividend investors.

Vanguard Total International Stock ETF (VXUS)

While not specifically focused on dividends, Vanguard Total International Stock ETF (VXUS) deserves mention due to its diversification and dividend payout.

Why VXUS?

Broad Diversification: VXUS spans over 8,000 stocks across developed and emerging markets, providing extensive global exposure.
Dividend Yield: It yields around 3.3%, which is still attractive for those seeking international exposure.
Expense Ratio: With an expense ratio of just 0.05%, VXUS is one of the most cost-efficient international ETFs.
Top Holdings: The fund includes companies like Taiwan Semiconductor and Tencent, with a balanced exposure to global markets.

VXUS is ideal for those seeking low-cost, broad international exposure while still receiving a modest dividend yield. It’s perfect for investors who want to keep things simple and diversified.

Best International Growth ETF: Which Should You Choose?

While the focus of this article is on dividend ETFs, it’s also important to mention growth ETFs, which focus on capital appreciation. For investors looking for the best international growth ETF options, Vanguard’s Vanguard Total International Stock ETF (VXUS) and iShares Core MSCI EAFE ETF (IEFA) are top picks.

These ETFs focus on growth stocks in international markets and provide broad exposure to developed and emerging economies. They offer lower yields compared to dividend ETFs but can be ideal for those prioritizing long-term capital growth over immediate income.

Choose Based on Your Investment Goals

In summary, if you’re looking for high income through international dividends, the best international dividend ETFs include VYMI, SCHY, and IDV. These funds offer a mix of high yields, strong dividend growth, and low to moderate expense ratios.

Suppose you’re interested in growth potential along with dividends. In that case, VXUS provides a diversified approach with a modest yield, making it a great choice for long-term investors seeking global exposure.

Investing in international dividend ETFs can provide you with a steady stream of income and diversify your portfolio, especially when U.S. stocks are facing high valuations. Ensure that you evaluate your financial goals and select the ETF that best aligns with your strategy.