Could It Be Time To Diversify Outside Of The U.S.?
"SCHY Focuses On International Stocks And Has A Solid Yield Above 3%"
As you know by my name, I love dividends. And in addition to sharing on here, I write regularly on the investment platform- Seeking Alpha.
My goal there is to teach everyday investors about building wealth, so they won’t to need to work to traditional retirement age.
I want to help you take control of your life, have F.I.R.E.
Here at Dividend Collection Agency the goal is to give investors and/or readers a different perspective. We take a simple approach to building wealth. And although investing may seem easy, people often miss opportunities by over complicating it.
But we are here to help.
Over the past year, international equities have quietly started to regain momentum. After trading at steep discounts to U.S. stocks for years, many international funds have outperformed U.S.-based counterparts over the last 12 months.
One standout is the Schwab International Dividend Equity ETF (SCHY). At the time of writing, SCHY is up close to 32% over the past year. Looking ahead, I believe this ETF remains well-positioned to continue delivering solid returns.
For income-focused investors, SCHY is especially attractive thanks to a dividend yield near 3.5%, offering both income and diversification outside the U.S.
While I remain bullish on U.S. equities—particularly due to ongoing AI CAPEX spending—international stocks are becoming increasingly compelling as U.S. valuations appear stretched. In this article, I’ll explain why SCHY stands out and why income investors should consider it going forward.
Markets Move in Cycles 🔄
Markets don’t move in straight lines—they move in cycles.
Despite higher-for-longer interest rates, geopolitical uncertainty, and a weakening labor market, U.S. equities have been remarkably resilient. In 2025, the S&P 500 closed up 16.39%, marking the third consecutive year of double-digit returns. Both 2023 and 2024 posted gains north of 20%.
Could we see a pullback or prolonged correction? Absolutely. But I wouldn’t rule out another strong year either—largely driven by AI enthusiasm, easing base rates, increased sponsor activity, and a pickup in M&A.
From 2010 through today, U.S. equities have dominated, gaining roughly 524% compared to 285% for international markets. But zoom out further and the picture changes.
Between 1970 and 1990, international stocks outperformed, returning 467% versus 225% for U.S. equities.
With international funds outperforming in 2025, it’s fair to ask: Are we entering a new market cycle?
Whether or not that’s the case, diversification outside the U.S. remains prudent—especially when international stocks trade at more attractive valuations across nearly every sector.
A weaker U.S. dollar, rate cuts, improving global growth, and historically low valuations could all fuel continued international outperformance into 2026.
Why SCHY Stands Out👆🏾
SCHY is the international sister fund to Schwab U.S. Dividend Equity ETF (SCHD), following a similar rules-based dividend strategy—just outside the U.S.
Expense ratio: 0.08%
Inception date: April 29, 2021
Management: Passive
For comparison, two international ETFs I like are:
Vanguard International High Dividend Yield ETF (VYMI) (0.17%)
JPMorgan International Value ETF (JIVE) (0.55%, actively managed)
SCHY’s ultra-low fee structure means $8 per year for every $10,000 invested—a meaningful advantage for long-term investors, as fees compound just like returns.
Over the past year, SCHY has significantly outperformed the Vanguard S&P 500 ETF (VOO) on a price basis—up over 31% vs. roughly 17%.
On a total return basis, the gap widens further thanks to SCHY’s higher yield.
Solid Yield & Tax-Efficient Distributions 🗂️
Income is where SCHY really shines.
Dividend yield: ~3.5%
Distribution frequency: Quarterly (switched from semi-annual in 2023)
For 2025, total distributions came in at $1.0582, slightly below 2024’s $1.072.
If international earnings growth accelerates as expected, dividend growth should remain healthy going forward.
Another benefit: tax efficiency. In 2024, roughly 95% of SCHY’s distributions qualified as QDI (Qualified Dividend Income). While 2025 tax data isn’t yet available, I expect similar treatment.
Portfolio Construction 👷🏾
SCHY focuses on high-quality, non-U.S. dividend payers, screening for:
10 consecutive years of dividend payments
Strong financials
Lower volatility
The fund currently holds 149 stocks, with top sector exposure to:
Financials (XLF)
Consumer Staples (XLP)
Industrials (XLI)
Geographically, the portfolio is led by:
United Kingdom (~15.6%)
Australia (~12.5%)
France (~11.4%)
Canada (~3.7%)
Notable holdings include British American Tobacco (BTI), Bank of Nova Scotia (BNS), and Manulife Financial (MFC).
Like SCHD, SCHY reconstitutes annually on the third Friday of every March. The most recent rebalance saw 18 stocks removed and 17 added, increasing the fund’s yield by roughly 0.15%.
Attractive Valuation 📉
Valuation is one of SCHY’s biggest strengths.
As of late November, the fund traded at a P/E of just 15.62x. Even after recent gains, this remains well below most U.S. equity benchmarks.
According to Charles Schwab, international earnings growth could catch up to the S&P 500 over the next few years.
If that plays out, SCHY could benefit from both earnings expansion and multiple re-rating, while continuing to pay a solid income stream.
Risks & Final Thoughts ⚠️
International stocks have outperformed recently—but that doesn’t guarantee continued outperformance. Historically, U.S. equities have outperformed more often than not.
That said, SCHY offers:
Diversification outside the U.S.
Attractive valuation
A solid, tax-efficient yield
Low fees
Exposure to a potential international earnings rebound
If you’re an investor seeking income plus diversification, SCHY deserves serious consideration as part of a long-term portfolio.
What international ETF(s) do you hold? Let me know in the comments.
Happy Investing!
☎️ If you’re looking to create passive income and build your wealth from one of the top-rated analysts, book a call (Let’s Talk Investing or Detailed Portfolio Review) with me to get started.
If you’re looking to start investing check out our investment group over on Seeking Alpha.
Here’s How: Click the Seeking Alpha link here. Click investing group, subscribe now, or the blue hyperlink in my bio.
Not financial advice. For educational purposes only. I am not a licensed professional. Do your own due diligence.
Like & subscribe if you’re active duty, a veteran, or just love investing.