Sunday Note: Investors - Don't Forget To Look Abroad

Looking abroad for low P/Es and Dividend Opportunities

This past week, I published an article on Seeking Alpha reviewing Vanguard International High Dividend Yield ETF (VYMI).

The idea to take a look at VYMI came from one of the themes I selected for the ETF Reliable Retirement Portfolio. Specifically, that superior growth opportunities may come from outside the U.S.

In this quick Sunday note, I simply wanted to draw your attention to something that caught my eye as I was reviewing VYMI.

The six pictures I will feature all come from the Vanguard Advisors sites for the 3 ETFS in question.

First, let’s focus on dividend yields. Here’s that graphic for VYMI. Since I was searching for various sources for solid current income, you’ll immediately see why I decided to review VYMI.

In today’s environment, that 4.17% dividend yield looks attractive doesn't it?

In the process, there was something else about VYMI that caught my eye. It’s featured in the second graphic below.

Looking at the very bottom of the graphic, it was the P/E and P/B ratios that jumped out at me. The combination of VYMI’s 4.17% yield and those low P/E and P/B ratios caused me to feature this ETF as a possible contrarian play.

While in the process of writing the VYMI article, however, another question struck me. I wondered “How do U.S. and international stocks compare at the moment in the biggest of pictures? What if I looked at total-market ETFs representing each?”

What I found was interesting. First, the same two graphics featured above for VYMI, but this time for Vanguard Total Stock Market ETF (VTI).

First, the SEC yield.

Next, the P/E and P/B ratios.

In summary, if you use this ETF to buy the entire U.S. market, you get a 1.22% yield, a P/E ratio of 24.3 and a P/B ratio of 4.3.

With that in mind, here are the same two graphics for Vanguard Total International Stock ETF (VXUS).

First, the dividend yield.

Next, the P/E and P/B ratios.

That’s right. In this comparison of total-market ETFs, the P/E and P/B ratios for international stocks are roughly half of their U.S. counterparts. And the dividend yield is almost double. In other words, you don’t even have to select a dividend-focused ETF such as VYMI to get at least decent yields. You just have to look abroad.

Now, there are good reasons for this. As just one example, the technology companies that have powered the recent phenomenal growth in the U.S. market are, well, unique to the U.S.

At the same time, some of these stocks have become extremely richly valued, bringing the U.S. market along with them.

So, the quick hit for this Sunday note?

If you are looking for diversification, and just possibly superior returns in at least the near term, and possibly even for the foreseeable future, don’t forget to look abroad.