Declining yields on investment income products has let investors to hunt for high dividend yielding stocks to boost their income. One product that I have actively used and would like to highlight in this article is the Vanguard International High Dividend Yield Index ETF (VYMI).
VYMI starts with a universe comprising of stocks contained in the FTSE All-World ex-U.S. High Dividend Index. It then excludes all REITs.
Ranking the remaining list of stocks by dividend yield, it focuses on the upper half, which comprises roughly 1,200 stocks.
The portfolio weighting for each constituent is proportional to its individual market capitalization. This assures investors that they are invested in a predominantly large-cap product and is a key risk mitigation tool for the fund.
Weighting in this manner means the largest dividend-payers take center stage in the portfolio, while smaller, riskier firms take on a proportionally smaller role. Indeed, the fund’s average return on invested capital (ROIC) stands at 8.1% versus the index average of 5.7%.
This Vanguard fund, typical of most Vanguard products, is extremely cost efficient, sporting an expense ratio of only 0.27%, well below the average mutual fund expense ratio of 0.80% to 1.00%.
Obviously, an investor expects a higher than average dividend yield for a product such as this, and VYMI does not disappoint in this regard. Historically, the fund as generated a trailing 12-month dividend yield in a range of 0.5% to 1.0% above the index average.
Currently, it sports a dividend yield of 5.9% as compared to the index yield of 5.2%.