The three primary U.S. stock indices closed with losses exceeding 1% each on Thursday, and investor apprehension loomed as they awaited Federal Reserve Chair Jerome Powell’s speech scheduled for today.
Therefore, I think the Vanguard Developed Markets Index Fund’s (VEA) combination of diversification, consistent dividend income, steady historical performance, and low expenses make it a solid buy in a market marked by uncertainty.
Launched and managed by The Vanguard Group, Inc., VEA invests in stocks of companies operating across diversified sectors. The fund provides exposure to the developed market equity space outside the US, including Canada, and major markets in Europe and the Pacific. This fund covers large, mid, and small-cap stocks.
The ETF has soared 6.2% year-to-date and 3.9% over the past nine months to close its last trading session at $44.58. Moreover, the fund has a beta of 0.89.
Here are the factors that could influence VEA’s performance in the upcoming months:
As of August 22, VEA has $110.98 billion in AUM and an NAV of $44.55. Its expense ratio of 0.05% compares to the category average of 0.40%. It saw a net inflow of $8.47 billion over the past year and $798 million over the past month.
VEA has a total of 4500 holdings currently, with its top 10 assets comprising 12.84% of its AUM. VEA’s top holdings include Nestle S.A. (NESN), with a 1.47% weight; ASML Holding NV (ASML), with a 1.27% weight; Samsung Electronics Co., Ltd. (005930), with a 1.16% weight, and Novo Nordisk A/S Class B (NVO.B), with a 1.13% weight.
VEA’s top sector is Financials, with 21.32% weight, followed by Health Technology, with 9.64% weight, Producer Manufacturing, with 8.81% weight, and Consumer Non-Durable, with 8.72% weight.
VEA pays an annual dividend of $1.20, which yields 2.66% on the current price. The fund has a four-year average yield of 2.91%. Its dividend payouts have increased at 4.8% CAGRs over the past three years. Moreover, the fund has paid dividends for 12 consecutive years.
POWR Ratings Reflect Promising Prospects
VEA’s robust fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
The ETF has an A grade for Buy and Hold and a B for Trade.
VEA is ranked #10 of 80 stocks in the A-rated European Equities ETFs category.
Click here to see the POWR Ratings for VEA (Peer).
The U.S. Consumer Price Index (CPI) rose by 3.2% In July compared to the previous year, hinting at a possible moderation in inflationary pressures. Monthly prices increased by 0.2%, aligning with expectations. Nevertheless, the annual rate surpassed that of June, marking the first annual increase in over a year, which might pave the way for more rate hikes.
In times of uncertainty in the economy, developed-market ETFs offer investors a way to achieve extensive diversification by providing access to a wide array of individual assets spanning the world’s most advanced economies.
Moreover, VEA not only offers an attractive current dividend yield but also boasts a history of dividend growth and long-term stability, making it a favorable choice for income-focused investors. In addition, its lower expense ratio and robust fund flows make VEA a solid buy.
How does Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) Stack up Against Its Peers?
VEA has an overall POWR Rating of B, which equates to a Buy. Investors could also consider looking at its peers in the European Equitiess ETF category Xtrackers MSCI Europe Hedged Equity ETF (DBEU), iShares Currency Hedged MSCI Eurozone ETF (HEZU), and iShares Inc iShares MSCI Denmark ETF (EDEN).
What To Do Next?
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VEA shares were trading at $44.71 per share on Friday morning, up $0.13 (+0.29%). Year-to-date, VEA has gained 7.92%, versus a 15.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
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