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ETF Specialist

A Better High-Dividend-Yield ETF

Striking a careful balance between yield and risk is a big appeal.

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Yields have declined over the past several decades, driving some investors into high-yielding stocks to shore up their income. Fund providers have responded to this desire with rules-based strategies specifically focused on yield. But it's important to remember that high-yielding stocks can be riskier than the overall market. Therefore, the risk management aspect of yield-centric funds becomes an important part of their investment merit. Furthermore, investors should not lose sight of the basic principles that have led to improved long-term performance. Low fees and diversification should not be abandoned in the quest for yield.

Vanguard International High Dividend Yield Index ETF (VYMI) strikes a balance between dividend yield and risk. It offers a higher yield than the MSCI ACWI Ex USA Value Index and leans toward stable firms that are likely to continue making dividend payments. Our enhanced ratings framework places a greater emphasis on fees. This fund’s low expense ratio gives it a considerable and durable advantage, sufficient to warrant an upgrade of its Morningstar Analyst Rating to Gold from Bronze.

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Daniel Sotiroff does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.