Last year, global dividends topped $1 trillion ($1.03 trillion to be precise). U.S. stocks were big factors in that equation with S&P 500 payouts soaring to record of nearly $312 billion and U.S. dividends reached another record in the first quarter.
But while the U.S. was a dividend leader last year and emerging markets contributed $1 to every $7 paid dividends globally, Europe ex-U.K. lagged in dividend growth terms. “British listed companies paid $102. 1 billion in dividends last year, and since 2009 have paid roughly $441 billion,” according to the Independent. The Independent goes on to note British firms accounted for 11% of global dividends last year, a percentage that only the U.S. beats. [The Case for U.K. Dividends]
Low interest rates, a recovery Eurozone economy and increasing cash hoards could foster improved European dividend growth this year. European firms have a combined $2.8 trillion in cash on hand, the most since 2003 and “companies of the benchmark Stoxx Europe 600 Index will pay 11.54 euros a share in dividends this year, the most since data going back to 2002,” reports Namitha Jagadeesh for Bloomberg.
Perhaps not surprisingly, the WisdomTree Europe SmallCap Dividend Fund (NYSEArca: DFE) has been the best performing Europe ETF dating back to the start of 2013, gaining 55.3% since then. [Small-Caps Recover in Europe]
The dividend yield on DFE’s underlying index is 3.7%, nearly double that of the S&P 500, according to WisdomTree. DFE has been bolstered by the recovery in European small-caps along with investors preferring to wade back into Europe with steadier fare such as U.K. and Swiss stocks. Those countries combine for over 34% of DFE’s weight.
Another U.K./Switzerland-heavy option to consider, but with a large-cap/mid-cap bias is the First Trust STOXX European Select Dividend Index Fund (NYSEArca: FDD). FDD is higher by 18.2% over the past year and allocates a combined 47% of its weight to the U.K. and Switzerland. [Excellent Diversified Europe ETFs]
Components are capped at a weight of 15% and weighted by dividend yield. Financials represent nearly 38% of FDD’s sector weight and that could prove to be a positive with U.K. and Swiss financial services firms expected to be some of Europe’s leading sources of dividend growth. French banks are also expected to boost payouts this year and France is FDD’s third-largest country weight at 11.3%.
First Trust STOXX European Select Dividend Index Fund
