Retirees: Collect a High Dividend While Diversifying Your Portfolio With This ETF
Key Points
Investing in a diversified exchange-traded fund (ETF) can be an effective way for dividend investors to reduce risk.
The Vanguard International High Dividend Yield ETF is a low-cost fund that offers both a high yield and tons of diversification.
It can also help investors reduce their overall exposure to U.S. markets.
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If you're in retirement or are just a risk-averse investor who wants to collect dividend income, your best option is to go with exchange-traded funds (ETFs). While the yield you'll earn from an ETF is often lower than what you might get with an individual stock, your risk is also far lower. That's because even if an individual stock cuts or suspends its payout, it may not have an adverse effect on the yield you'll collect from an ETF, due to how diverse it is.
An ETF that can be ideal for investors seeking both high dividend income and plenty of diversification is the Vanguard International High Dividend Yield ETF (NASDAQ: VYMI). Here's why you'll want to consider adding this fund to your portfolio today.
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The fund charges low fees and has an excellent yield
One of the best features about the Vanguard International High Dividend Yield ETF is that its fees are incredibly low. The fund has an expense ratio of only 0.07%, which means that fees will be minimal. On a $10,000 investment, you'll be incurring just $7 in annual fees.
Meanwhile, it pays a dividend that yields around 3.3% -- that's close to three times what the S&P 500 averages (1.2%). The fund is able to provide this type of payout by targeting high-yielding stocks, such as Roche, Novartis, and Shell.
Its vast portfolio can help you diversify internationally
Equally important for investors these days, particularly amid geopolitical conflict and uncertainty in the markets, is portfolio diversification. And this Vanguard fund offers plenty of that. It has over 1,500 stocks in its portfolio, and its largest holding (Roche) makes up just 1.8% of the entire fund. A problem with many large ETFs is that they can have significant exposure to one or more stocks that can have a considerable impact on their overall returns, but that's not the case with the Vanguard International High Dividend Yield ETF.
As its name suggests, this is also a geographically diverse fund. Just over 43% of its holdings are in companies based in Europe, 27% in the Pacific region, and about 21% are in emerging markets. The fund can be particularly valuable to investors who want to diversify outside of the U.S., as its focus is on non-U.S. markets.
As investors have been gravitating toward safer investments, this Vanguard fund has been doing fairly well. Over the past 12 months, it has risen by 24%, which is better than the S&P 500's gains of 16% during that time frame. Overall, whether you want diversification or just a lot of dividend income, the Vanguard International High Dividend Yield ETF can be a great investment to buy and hold for the long haul.
Should you buy stock in Vanguard International High Dividend Yield ETF right now?
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool recommends Roche Holding AG. The Motley Fool has a disclosure policy.
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