Why This International ETF Might Be the Most Underrated Investment of 2026

With so many exchange-traded funds (ETFs) trading in the U.S., "underrated" is often a matter of perspective. For some investors, ETFs in the underappreciated/underrated camp are simply strong-performing funds that aren't generating much buzz.

To other market participants, under-loved ETFs are big funds or those hailing from well-known issuers' stables that are flying under the radar. The Vanguard International High Dividend ETF (NASDAQ: VYMI) checks all three of those boxes. Believe it or not, what ranks as one of the best Vanguard ETFs in 2026 is generating appropriate attention.

This international Vanguard ETF is quietly crushing the competition. Image source: Getty Images.

Obviously, branding isn't the issue here. Nor are age and size. This $19.5 billion ETF turned 10 years old in February. More important than the fund's underrated label is its status as a leader in its respective category.

Dividends don't mean underperformance

When it comes to domestic dividend stocks, investors are often conditioned to believe that in exchange for the benefits associated with that asset class, they might have to deal with prolonged periods of lagging behind broader benchmarks. This Vanguard international ETF dispels that notion, as it's trouncing both the S&P 500 and wider international ETFs this year.

VYMI Total Return Level data by YCharts.

Given those gaps, it'd be reasonable to think this fund would be commanding more attention. It's not, and that's all right. Performance and how the ETF arrived there are what matter. This Vanguard fund tracks the FTSE All-World ex-US High Dividend Yield index, but don't be fooled into thinking this ETF leans into risky high-yield stocks. Yes, its 3.5% dividend yield looks good compared to broader domestic and international indexes, but that yield doesn't imply elevated risk.

In fact, some experts note that this Vanguard ETF strikes the right notes between quality high-dividend stocks and yield traps, as in the bulk of its 1,565 holdings are in the former camp, not the latter. That's the result of the index excluding half of the universe of dividend payers from which it can select stocks.

That's an underappreciated attribute because it boosts the ETF's quality and safety profiles while potentially mitigating the odds of future dividend offenders entering the portfolio.

More to appreciate with this ETF

This Vanguard ETF offers more benefits beyond its underrated status. At a time when many investors are heavily allocated to domestic tech stocks, there's wisdom in considering international value strategies, particularly when those funds are lightly exposed to tech. The Vanguard ETF devotes just 5.4% of its roster to tech stocks, about 400 basis points below the category average.

Speaking of sector exposures, half of Vanguard's holdings are in financial services and industrial stocks. Those sectors are key drivers of payout growth in markets outside this country. Plus, international dividend payers are attractively valued compared to U.S. stocks.

One point about this ETF that is appreciated is its low annual fee of 0.07%, or $7 on a $10,000 position. That confirms the fund lives up to the Vanguard heritage of low costs and that it's far cheaper to own the average fund in the international dividend category.

Todd Shriber has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.