Can the Vanguard International High Dividend Yield Index Fund ETF Shares Outperform Again in 2026?

• The money has returned 29.6% truthful acold successful 2025, crushing the S&P 500's 15.6% gain.

• Heavy vulnerability to European financials and vigor giants drove returns portion the weakening dollar provided an further tailwind.

• The valuation spread with U.S. stocks has narrowed, making a repetition show imaginable but acold from guaranteed.

• 10 stocks we similar amended than Vanguard International High Dividend Yield ETF ›

For much than a decade, American investors who ventured overseas were punished for their diversification. International stocks trailed U.S. equities successful 13 of the 17 years pursuing the 2008 fiscal crisis, arsenic American maturation stocks dominated planetary returns, turning "U.S. exceptionalism" into Wall Street gospel.

Then 2025 happened -- and 1 exchange-traded money (ETF) delivered a stunning exception. The Vanguard International High Dividend Yield Index Fund ETF Shares (NASDAQ: VYMI) returned 29.6%, astir doubling the S&P 500's 15.6% gain.

Now, investors look the inevitable question: Can the money bash it again successful 2026?

Understanding what drove 2025's outperformance is indispensable to handicapping adjacent year. The money tracks the FTSE All-World ex-US High Dividend Yield Index, holding much than 1,500 dividend-paying stocks crossed developed and emerging markets -- excluding the United States. That positioning proved fortuitous arsenic respective macro forces converged.

European stocks surged connected the backmost of Germany's historical fiscal pivot. After years of austerity, Europe's largest system announced plans for infrastructure and defence spending valued astatine astir $1.3 trillion implicit the adjacent decade.

European banks -- which comprise a important information of the fund's 42% fiscal services allocation -- saw instrumentality connected equity ascent from azygous digits to debased treble digits arsenic involvement rates normalized. Holdings similar HSBC Holdings, Novartis, and Shell apt benefited from these trends; however, isolating their nonstop publication to the fund's instrumentality is challenging.

The weakening dollar amplified these gains for U.S. investors. When overseas currencies fortify against the U.S. dollar, returns connected unhedged planetary investments person an automatic boost -- and 2025 delivered the dollar's worst first-half show since 1973.

Beyond the macro tailwinds, the fund's operation deserves credit. The disbursal ratio sits astatine conscionable 0.17%, among the cheapest successful its category. The dividend output hovers adjacent 4%, much than treble the S&P 500's astir 1.5%. And astatine a price-to-earnings ratio of astir 13, the money trades astatine a notable discount to U.S. large-cap maturation stocks -- though that spread tin displacement quickly.