Many investors are heavy on U.S. assets and overlook international opportunities. However, with exchange traded funds, investors can diversify with global exposure and potentially generate higher yields.
U.S. investments still make up a large portion investors’ core portfolios, but an ETF like the SPDR S&P 500 ETF (NYSEArca: SPY) only comes with a 2.02% 12-month yield.
Investors do not need to marry themselves to U.S. equities. Instead, one can look for overseas ETF opportunities.
Overseas exposure helps investors reduce home-country bias. For instance, European and emerging market equities outperformed U.S. stocks over the past month due to the U.S. government shutdown and default scare.
Moreover, a weak U.S. dollar bolstered international ETFs returns since country-specific ETF underlying assets are denominated in the local currency, strengthening overseas currencies would generate greater returns when converted back to the U.S. dollar.
For income investors, some country-specific ETFs also offer surprising dividend payouts as well. Here is our list of unexpected ETFs with unexpected yields:
Global X China Financials ETF (NYSEArca: CHIX)
12-month yield: 2.9%
Comment: Many believe Chinese banks have problems with non-performing loans. However, cash flow analysis on the Chinese banking system suggests that asset quality of the banks is better than many believe, writes Jeremy Schwartz, Director of Research at WisdomTree.
“I believe these companies’ high dividend yields make them attractive for income-oriented emerging market strategies,” Schwartz said.
iShares MSCI Poland Capped ETF (NYSEArca: EPOL)
12-month yield: 3.02%
Comment: Poland’s financial regulator recently stated that it may relax dividend limits on some banks to allow them to raise payouts, Business New Europe reports. Financials are 51.4% of EPOL. Additionally, the Market Vectors Poland ETF (NYSEArca: PLND) shows a 12-month yield of 3.63%. Financials are 39.9% of PLND.
Market Vectors Africa Index ETF (NYSEArca: AFK)
12-month yield: 3.57%
Comment: AFK also includes non-African companies that generate a majority of revenue in Africa. For instance, the ETF’s country allocations include U.K. 18.5% and Canada 5.1%, along with South Africa 20.8%, Egypt 17.9% and Nigeria 16.8%.
iShares MSCI Singapore ETF (NYSEArca: EWS)
12-month yield: 4.38%
Comment: The Singapore ETF also leans toward financials at 52.7%, followed by industrials 20.2% and telecom services 12.9%. Singapore also carries an AAA credit rating.
db X-trackers MSCI Germany Hedged Equity Fund (NYSEArca: DBGR)
12-month yield: 4.95%
Comment: The db X-trackers Germany hedged equity fund provides exposure to German equities, but it also hedges against fluctuations between the U.S. dollar the euro. DBGR would do well against a non-currency hedged ETF during periods of euro weakness. [Say Auf Wiedersehen to the Euro With This ETF]
Market Vectors Latin America Small-Cap Index ETF (NYSEArca: LATM)
12-month yield: 5.35%
Comment: LATM focuses on small-cap companies in Latin America, so many of the companies will focus on domestic growth,giving investors exposure to the emerging markets consumer story. Top country allocations include Brazil 38.2% and Mexico 16.0%.
Market Vectors Egypt Index ETF (NYSEArca: EGPT)
12-month yield: 7.68%
Comment: A more stable political environment in Egypt is bolstering stocks and stoking hopes for increased economic growth. Additionally, high dividend yields has helped bring back investment interest. [A Surprising EM ETF Keeps on Soaring]
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own SPY.