International Dividend Stocks Hit All-Time Highs Yet Still Trade at a Significant Discount

When major stock indices reach fresh all-time highs, it’s natural for investors to worry about valuations. But the recent surge to historic levels doesn’t mean every investment opportunity has dried up. In fact, some dividend-focused international funds offer a compelling paradox: they’re near their own peaks while trading far below their U.S. equivalents on fundamental metrics.

The Vanguard International High Dividend Yield ETF (NASDAQ: VYMI) represents an intriguing case study. Despite shares trading near all-time highs, the underlying holdings present an unexpected value proposition—one that deserves closer examination for portfolio diversification and income generation.

Why Valuation Matters More Than Price Level

It’s crucial to distinguish between a fund’s share price and the actual valuation of its holdings. The VYMI trades at vastly different valuations than comparable U.S. funds, even as both reach record highs.

Consider the numbers: stocks in this international fund sport an average P/E ratio of just 13.5 times earnings, with annual earnings growth averaging 12.8%. Compare that to the Vanguard High Dividend Yield ETF (NYSEMKT: VYM)—its U.S.-focused counterpart—which carries a P/E ratio exceeding 20 and slower earnings expansion of 11.6%. That’s a meaningful gap in valuation efficiency, especially when the international version is growing faster.

The expense ratio of 0.17% is particularly competitive for a specialized international equity fund. Many foreign-listed securities incur additional operational costs, making this fee structure attractive for cost-conscious investors seeking yield without excessive drag.

Global Diversification in a Concentrated Portfolio

The fund’s structure balances breadth with concentration. It holds over 1,500 stocks across developed and emerging markets worldwide, providing genuine diversification benefits. Yet no single position exceeds 1.8% of assets—avoiding the concentration risk seen in many major indices.

The holdings read like a who’s who of blue-chip international companies. Novartis (NYSE: NVS), Nestle (OTC: NSRGY), and Toyota (NYSE: TM) represent just a fraction of the portfolio, yet they anchor the fund with quality and stability. This mix of recognizable multinational firms with smaller regional players creates a genuinely diverse holding structure.

At current prices, VYMI offers a dividend yield of approximately 3%, providing steady income alongside potential capital appreciation. The combination of international exposure, reasonable valuations, and meaningful income makes it a legitimate consideration for investors seeking to enhance portfolio returns through geographic diversification.

Assessing the Risk-Return Profile for Long-Term Investors

International investing inevitably introduces complexities absent from pure U.S. equity exposure. Currency fluctuations can amplify or dampen returns, and geopolitical tensions occasionally roil markets across multiple countries simultaneously. These are real risks that deserve acknowledgment.

However, the valuation advantage is substantial enough to compensate for these additional risks. Trading at such a pronounced discount to U.S. equivalents—despite reaching all-time highs—suggests that markets may be underpricing the long-term growth and income potential of international dividend-paying stocks.

For investors with a multi-year investment horizon, the current entry point offers an attractive risk-adjusted opportunity. The lower valuations provide a margin of safety even as the fund reaches historic price levels, while the 3% yield cushions returns and provides regular income during market volatility.