A Spot of Luck for the International Investor

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International Markets

For a decade or so, the international chap seemed to be perpetually trailing behind his American counterpart on the stock market field. A rather dismal state of affairs, what? The S&P 500, that robust fellow, was consistently having the last laugh, fueled by low interest rates, a booming economy, and a general fondness for all things U.S.A. It was all a bit sticky, really.

But 2025, bless its heart, brought a rather unexpected turn-up for the books. Investors, it seems, began to remember that valuations actually mean something. Growth rates overseas started to perk up, and the prospect of assistance from the Federal Reserve dwindled, which, oddly enough, proved rather beneficial. It unlocked a bit of inherent value, you see, like finding a tenner in an old waistcoat pocket.

The Vanguard S&P 500 ETF, a perfectly respectable sort of fund, managed a commendable 18% return. But the iShares Core MSCI EAFE ETF – representing Europe, Australasia, and the Far East, a rather dashing bunch – positively flew past it with a 32% return. A significant difference, wouldn’t you agree?

However, the real star of the show, the positively ripping success, was the Vanguard International High Dividend Yield ETF. A return of 38%, simply smashing! It had a knack for spotting value and a fondness for sectors that were doing rather well. And the momentum, thankfully, hasn’t flagged. Year-to-date, through February 11th, it’s gained another 10%, outpacing both the S&P 500 and EAFE. A most satisfactory state of affairs.

Given the market’s current penchant for cyclical, defensive, and value stocks – and the fact that this momentum seems determined to continue – I rather suspect we’re in for another good year with the Vanguard International High Dividend Yield ETF. A bit of a lucky streak, perhaps, but one can’t complain.

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Value and Yield: A Most Agreeable Combination

It’s a common observation that international stocks tend to trade at a lower price/earnings multiple than their American cousins. Dividend stocks, naturally, are even cheaper, and this ETF is no exception. A bargain, you might say.

The Vanguard International High Dividend Yield ETF boasts a P/E of 13.5, roughly half that of the S&P 500. This valuation gap offers a rather comforting downside cushion should the global economy decide to take a bit of a wobble. A sensible precaution, wouldn’t you agree?

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Furthermore, the fund offers a dividend yield of 3.3%, roughly triple that of the S&P 500. A most agreeable addition to capital growth, wouldn’t you say? A bit of extra jam on the scone, so to speak.

International Earnings Growth: A Promising Turn

For a while there, overseas stock performance was hampered by a distinct lack of earnings and revenue growth. In 2025, EAFE countries collectively managed a mere 1% growth. Emerging markets did a bit better with 10%, but rates were rather scattered. A bit of a muddle, really.

However, things are looking up. EAFE is expected to deliver 9% earnings growth this year, and emerging markets are forecast to rise to 17%. That puts international earnings growth on par with the S&P 500. When growth rates are similar, the cheaper group tends to look rather attractive. A bit of common sense, wouldn’t you say?

International Dividend Stocks: Ready for Another Jolly Good Year

Given the improvement in fundamentals and attractive valuations, the Vanguard International High Dividend Yield ETF could be poised to crush the S&P 500 once again. Earnings growth alone should fuel share price gains, but I wouldn’t be surprised to see a bit of momentum-driven P/E expansion add to the returns. A most delightful prospect.

International stocks have lagged U.S. stocks for years. But it appears the trend is finally starting to reverse. A spot of luck for the international investor, wouldn’t you agree? A most agreeable turn of events, indeed.

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2026-02-17 00:53