International Dividend Stocks Lag

Feb 6, 2025

It’s been three months since the Presidential election, and in that time the S&P 500 ( SPY) has returned a solid 6.59%.  That outperformance has been driven by large cap growth, while value indices have lagged behind. US dividend-focused ETFs have likewise lagged the broad market to a degree, but they are still handily outperforming their international peers. In the chart below, we show the total return of US and International dividend ETFs from multiple families of funds.  Of course, each of these ETFs have slightly different methodologies.  For example, whereas the SPDR S&P Dividend ETF (SDY) is perhaps the most restrictive, only including stocks that have raised dividends for at least 20 years in a row, others like the Invesco Dividend ETFs (PID and PFM) have easier standards requiring only 5 years of dividend history while the Vanguard High Dividend ETFs (VYMI and VYM) takes the stocks with the highest forecasted yields for the 12 months ahead. Regardless of methodology, there has been a clear distinction between US and internationals save for one US ETF. The SPDR S&P Dividend ETF (SDY) is down 2.5% in the past three months, which is the worst performance of those listed.

As is the case with equities in a broader sense, the recent underperformance of international stocks relative to the US is nothing new and consistent with longer term trends. In the charts below, we show the relative strength over the past five years for US versus international dividend ETFs grouped by their issuer/methodologies.  No matter which way it is chopped up, international dividend stocks have underperformed US counterparts for much of the past few years. Currently, those relative strength lines are testing 5 year lows for the likes of the Invesco ETFs and Vanguard High Yield ETFs.

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