No market is on par with the U.S. when it comes to total dividends paid, but Europe does offer opportunity for income investors.
For the first time, global dividends topped $1 trillion ($1.03 trillion to be precise) last year. U.S. stocks were big factors in that equation with S&P 500 payouts soaring to record of nearly $312 billion. Impressive, but ““British listed companies paid $102. 1 billion in dividends last year, and since 2009 have paid roughly $441 billion,” according to the Independent. [The Case for U.K. Dividends]
That is a massive percentage of the global dividend pie given the size of the U.K. economy. Ex-U.K., European dividends have risen 8% since 2009, indicating the continent has the potential to deliver robust payout growth going forward.
However, the Europe dividend ETF niche has previously been limited in terms of number of offerings. The WisdomTree Europe SmallCap Dividend Fund (NYSEArca: DFE), last year’s top-performing Europe ETF, has dominated the Europe dividend ETF story with some consideration paid to the First Trust STOXX European Select Dividend Index Fund (NYSEArca: FDD). [WisdomTree Small-Cap Europe ETF Tops $1B in AUM]
Investors now have more ETF options for accessing European dividend payers thanks to Wednesday’s launch of the WisdomTree Europe Dividend Growth Fund (NYSEArca: EUDG).
EUDG tracks the WisdomTree Europe Dividend Growth Index, “a fundamentally weighted index that measures the performance of dividend-paying common stocks with growth characteristics selected from the WisdomTree DEFA Index,” according to WisdomTree.
EUDG’s nearly 200 constituents are weighed on the basis of annual dividends paid and it is a lineup that turns up some familiar names. However, country selection is critical when evaluating European dividend markets. EUDG obliges with a combined 47.3% weight to the U.K. and Switzerland, two of the region’s better dividend markets. [To Europe for Dividends]
Germany and France combine for just over a quarter of EUDG’s country allocation.
Highlighting Switzerland’s importance in the Europe dividend conversation, Novartis (NYSE: NVX), Nestle (PK: NSRGY) and Roche are the new ETF’s top-three holdings at a combined weight of almost 16%.
European consumer staples and health care stocks are among the region’s better dividend destinations at the sector level and those groups combine for almost 37.5% of EUDG’s weight. Importantly, there is significant opportunity for European dividend growth.
“While the United States is setting new highs for its Dividend Stream®, Europe’s earnings and dividends—similar to the general European economy—are still catching up to their highs set prior to the 2008–09 global financial crisis. Europe needs dividends to grow at least 37% more before the aggregate dividends from these firms reach their 2008 levels,” said WisdomTree Research Director Jeremy Schwartz in a note out earlier this week.
The WisdomTree Europe Dividend Growth Index has a dividend yield of 3.17%. EUDG charges 0.58% per year.