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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.

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