International developed markets have significantly outperformed the S&P 500 in 2026, and investors are utilizing three prominent exchange-traded funds (ETFs) to capitalize on this trend while generating income. The Amplify CWP International Enhanced Dividend Income ETF (IDVO), Schwab Fundamental International Large Company Index ETF (FNDF), and Avantis International Equity ETF (AVDE) each offer unique strategies that enhance returns through international exposure alongside different income generation methods.
As of May, international markets have been leading U.S. equities, benefitting from a rally largely focused on sectors such as European financials, Japanese industrials, and global consumer brands that typically trade at lower valuation multiples and deliver higher yields compared to American tech giants. Importantly, these funds are also experiencing a growth in income that parallels the increase in prices.
### Why International Dividend Exposure?
The case for favoring international dividend stocks in 2026 is clear-cut. Developed-market indices generally exhibit a higher dividend yield than the S&P 500, as companies in these markets are inclined to return more cash to shareholders through dividends rather than stock buybacks. This year, with international markets outperforming the U.S. in terms of price appreciation, dividend-focused funds can capture this dual source of returns. Additionally, a weaker U.S. dollar has allowed foreign currency-denominated dividends to convert into greater amounts of U.S. dollars.
The three ETFs provide distinct strategies to exploit these advantages. IDVO focuses on an income-maximizing approach utilizing options; FNDF emphasizes a fundamental tilt towards cash flow and dividend-generating companies; and AVDE employs an actively managed screening process to identify value and quality stocks.
### IDVO: The Income-Maximizer
The IDVO ETF adopts a more aggressive income strategy through an active dividend emphasis on international large-cap equities combined with covered call options. This method results in monthly distributions, with payouts in 2026 ranging from $0.20 to $0.22—an increase from prior years. This fund is currently up approximately 11.2% year-to-date and has gained around 32% over the past year, trading near $42 per share. Its expense ratio is 0.65%, which is relatively affordable for an actively managed fund employing options.
However, the inherent nature of covered-call strategies limits potential gains in a rapidly rising market, making it more suitable for investors valuing immediate cash flow over maximum upside potential.
### FNDF: Fundamental Weighting Favoring Dividends
The FNDF ETF is designed to serve as a core international holding, tracking the Russell RAFI Developed ex-US Large Company Index. This index uses fundamental measurements like sales, retained operating cash flow, and dividends to determine company weightings. Consequently, FNDF tends to emphasize larger, more profitable, cash-returning businesses while avoiding high-priced growth stocks, aligning well with the prevailing trend towards international value stocks.
FNDF has an atypical distribution profile, with semi-annual payouts. The 2025 year-end distribution was $1.3405 per share, showcasing a progressive increase from previous years. What sets FNDF apart is its low cost, as its fundamental weighting necessitates annual rebalancing, effectively trimming high performers and reallocating to laggards. Although it may not be suited for those seeking regular income, it is an excellent option for long-term investors focused on total returns.
### AVDE: Active Screening with Low Costs
The AVDE ETF is often overlooked but offers an exciting approach. Managed by a team formerly from Dimensional Fund Advisors, it employs a multi-factor screening process across around 2,000 developed-market companies. This strategy prefers smaller-cap, value, and more profitable stocks while maintaining low costs and modest portfolio turnover.
Currently, AVDE has risen around 10% year-to-date and gained approximately 30% over the past year, with shares priced around $90. It pays dividends semi-annually, though the amounts can vary. Despite a decreased payout so far in 2026, this is more reflective of its payout timing rather than a reduction.
AVDE is essential for investors seeking a broader multi-factor approach, casting a wider net that captures smaller companies that pure dividend strategies might miss.
### Choosing the Right Fund
The choice among these funds largely hinges on individual financial goals. For investors requiring monthly cash flow, IDVO is the prime choice, even if it comes with limitations on upside potential. For those looking to build a long-term international foundation where dividends function as supplementary returns, FNDF’s fundamental strategy holds promise. Meanwhile, AVDE is an ideal consideration for investors wanting exposure across the spectrum of international stocks.
Lastly, it is essential to recognize that all three international funds expose investors to foreign currency fluctuations, which can influence total returns based on the relative strength of the dollar. In 2026, the weaker dollar has been advantageous, but future currency shifts could alter this dynamic significantly. Thus, understanding the currency exposure is crucial before making investment decisions.
