International Dividend ETFs
September 12th at 11:10am by Tom Lydon
Many turned to U.S. dividend stocks for an easy way to ride the rally and receive some extra cash on the side. However, investors should also consider dividend exchange traded funds that track overseas markets as a way to diversify a portfolio.
The iShares International Select Dividend ETF (NYSEArca: IDV) and iShares Emerging Markets Dividend ETF (NYSEArca: DVYE) are gaining momentum, writes David Fabian, Chief Operations Officer and Managing Partner of Fabian Capital Management, for Minyanville. [Why Investors are Looking at Foreign Stock ETFs for Income and Growth]
IDV recently crossed above its May high. Meanwhile, IDV has increased 13% since its June low, outpacing domestic dividend rivals.
Fabian attributes the surge in overseas assets to “rebalancing and diversification away from domestic stocks and into international companies with more attractive valuations.”
Additionally, international stocks typically have higher yields than that of stocks at home. IDV has a 4.55% yield and DVYE comes with a 4.37% dividend rate. In comparison, the iShares Select Dividend ETF (NYSEArca: DVY) offers a 3.55% yield.
Nevertheless, the more attractive returns come with greater risks. International markets are typically more volatile than U.S. markets, especially in the emerging markets where currency fluctuations have pressured their equities market. [Investors Take Second Look at Pummeled Emerging Market ETFs]
“If you currently have exposure to international or emerging market dividend ETFs, I would continue to hold those positions with cautious optimism right here,” Fabian said. “If fundamentals continue to improve overseas, we will likely see additional outperformance from this segment of the economy versus domestic stocks.” [Dividend ETFs for the Long Term]
For more information on dividend funds, visit our dividend ETFs category.
Max Chen 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.