International Dividend ETFs Merit Consideration
December 9th, 2013 at 7:30am by Todd Shriber
These are golden days for U.S. dividends. Not only are U.S. companies showing a willingness to spend some of their cash hoards on new or higher payouts, but exchange traded funds sponsors are responding to investors’ thirst for income by rolling out scores of new dividend-focused products.
Although much of this year’s dividend focus has been on U.S. equities and the relevant ETFs, investors may want to consider foreign dividend payers as well. There are scores of ETFs that can be used to do just that, including the iShares International Select Dividend ETF (NYSEArca: IDV) and the WisdomTree International Dividend ex-Financials Fund (NYSEArca: DOO).
“From a technical perspective, both indexes have taken a pause over the last several weeks and are currently resting right near their respective 50-day moving averages. Conservative investors could consider acquiring a small amount of exposure now, and then adding if additional volatility presents itself,” according to FMD Capital. The firm notes “that both funds have outsize allocations to Australia, France, and the U.K. as a whole, but also carry smaller allocations to over indebted EU nations such as Italy, Greece, and Spain.”
The $2.9 billion IDV is dominated at the country level by Australia, the U.K. and France, which combine for about 47% of the fund’s weight. France could be the wild-card with IDV as the Eurozone’s second-largest economy appears lethargic, particularly compared to some of IDV’s other large country exposures. [An Income Portfolio With International Dividend ETFs]
IDV’s trailing 12-month yield is 4.45%. The $346.8 million DOO gives investors an avenue for staying involved with rate-sensitive, income-generating sectors even as U.S. interest rates climb. DOO allocates a combined 32% of its weight to utilities and telecom names, which if this were a U.S.-focused ETF, would make it vulnerable to rising rates. [International Dividend ETFs and Rising Rates]
However, DOO is off just 0.3% in the past month even as 10-year Treasury yields have jumped 10.3%. Other global dividend ETFs include the $1 billion PowerShares International Dividend Achievers Portfolio (NYSEArca: PID). PID is a global fund, though not ex-U.S. as the U.S. is 20.4% of the ETF’s weight. The U.K. and Canada combine for half of PID’s geographic exposure. Nearly all of PID’s 58 holdings trade on U.S. exchanges.
The FlexShares International Quality Dividend Index Fund (NYSEArca: IQDF) debuted in April and features a 30-day SEC yield of 4.63%. IQDF is U.K./Japan/Australia heavy. The new funds focuses on fundamental factors, such as profitability, solid management and reliable cash flow. With a P/E ratio of 16.7, IQDF trades at a lower valuation than U.S. stocks. The fund is up 6.2% in the past three months.
iShares International Select Dividend ETF