Dividend ETFs: Searching Overseas for Yield
October 17th, 2011 at 11:40am by Tom Lydon
Income-seeking investors have been tapping into dividend exchange traded funds in a low interest-rate environment for bonds.
Some U.S.-based investors may want to look at dividend ETFs that follow international stocks.
WisdomTree DEFA Fund (NYSEArca: DWM) focuses on international large-cap companies in 16 countries in Asia and European developed markets. Withthis diversification also comes exposure to the foreign currencies, the euro, the British pound and the Japanese yen. The fund has an expense ratio of 0.48% and a yield of 3.27%. [Dissecting Two Large Dividend ETFs]
The high exposure to European markets in DWM exposes this ETF to more risk, as the sovereign debt crisis rages on. The fund also has exposure to European banks, which are facing funding risks. Overall, some of the standout companies in the fund have benefited from the weakness in the euro and any growth outside of Europe, according to a profile of the ETF from Morningstar. [REIT ETFs Attract Dividend Hunters]
Vanguard European ETF (NYSEArca: VGK) also ftrackson large and mid-cap stocks, but focuses only on Europe. The fund tracks the MSCI Europe Index. This ETF has a dividend yield of 5.65%, and an expense ratio of 0.16%. The countries with the heaviest weighting are the United Kingdom, France and Germany. Unlike DWM, which focuses heavily on financials, VGK has more diversity, with telecom, consumer staples and energy represented.
The iShares Dow Jones EPAC Select Dividend (NYSEArca: IDV) also focuses the most weight in financials, followed by utilities and energy. Australia, the United Kingdom and Italy have the highest allocations. The expense ratio is 0.50%, with a yield of 5.49%. The methodology balances maximizing dividend yield with ensuring companies show signs of having healthy a healthy business, and the ability to keep the yields in the future. [S&P's Best Dividend ETF Picks]
WisdomTree DEFA Fund
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.