Here's My Favorite High-Dividend ETF to Buy Right Now

There are some excellent dividend stock exchange-traded funds (ETFs) in the market, and that's especially true right now. Thanks to the relatively high-interest environment and economic uncertainty, many dividend stocks are trading significantly below their highs.

With that in mind, it might come as a surprise that my favorite high-dividend ETF to buy right now is one that isn't beaten down. In fact, the Vanguard International High Dividend Yield ETF (NASDAQ: VYMI) just reached a new all-time high on the day this was written. But it isn't nearly as "expensive" as you might think and can be a great choice for anyone looking for both dividend income and geographical diversification.

About the Vanguard International High Dividend Yield ETF

The Vanguard International High Dividend Yield ETF is an index fund which, as the name implies, invests in companies based outside of the United States with above-average dividend yields.

Image source: Getty Images.

In all, the index it tracks consists of about 1,500 stocks, most of which are larger companies (the median market cap is $49.1 billion). About 44% of the portfolio is based in Europe, 26% in the Asia-Pacific region, and 22% from emerging markets, to name the big three contributors.

The fund is weighted, meaning that larger companies make up a larger proportion of the fund's assets. But unlike some of the most popular U.S. index funds, such as the Vanguard S&P 500 ETF (NYSEMKT: VOO), even the largest components make up less than 2% of the assets.

It's also worth noting that even though the fund invests in international companies, that doesn't mean that it's businesses don't operate in the U.S. There's certainly an element of that, but you'll find Nestle, Shell, Novartis, Toyota, and Royal Bank of Canada, just to name a few of the fund's 10 largest holdings.

The dividends paid by these stocks are passed through to shareholders, and because they come from over 1,500 different companies, all of which have different distribution schedules and other factors, the payments can vary from quarter to quarter. However, based on the past four quarterly distributions, the ETF has a yield of about 4.3% as of this writing.

The fund is also relatively cheap. Sure, its 0.17% expense ratio isn't quite as low as you'll find with some of the large, domestic Vanguard ETFs. But it is a fraction of the cost of most actively managed mutual funds and ETFs that focus on foreign stocks.

Why it's worth a look right now

It's worth noting that the Vanguard International High Dividend ETF is trading for just below its 52-week high as I write this. But that doesn't mean it's expensive.

In fact, quite the opposite is true. The average price-to-earnings (P/E) ratio of the stocks in the ETF is just 11.7 despite a weighted-average earnings growth rate of more than 13% from the stocks in the portfolio. The average stock in the portfolio trades for just 1.4 times book value, half the price-to-book value (P/B) valuation of the typical stock in Vanguard's U.S. version of the ETF, the Vanguard High Dividend Yield ETF (NYSEMKT: VYM).

Of course, there are some risks. Many of the companies in the portfolio could potentially be impacted by tariffs, and although it has rebounded, that's why this ETF was extremely hard-hit when President Trump's initial reciprocal tariff announcement took place. There are also foreign exchange risks, political risks, and several others that don't apply much to purely U.S. companies.

For my money, the Vanguard International High Dividend Yield ETF looks extremely attractive right now from a risk-reward perspective. I added it to my portfolio earlier this year and plan to continue to add to my position throughout 2025.

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Matt Frankel has positions in Vanguard International High Dividend Yield ETF and Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF and Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool has a disclosure policy.