Low interest rates in the U.S. have sent investors flocking to dividend stocks and exchange traded funds in recent years. On a combined basis, the four largest U.S. dividend ETFs have over $60 billion in assets under management.
With central banks through the developed world paring rates and engaging in monetary easing, government bond yields are falling, giving investors good reason to consider international dividend ETFs.
“In Germany and France, all companies that pay dividends now yield more than 10-year government bonds. In the U.K., 88% do, according to Strategas,” reports Amey Stone for Barrons.
Along with Australia, Canada, Germany, Japan and the U.K., France is one of the developed markets where the dividend yield is higher than the yield on benchmark 10-year government bonds. Pharmaceuticals giant and Warren Buffett holding Sanofi (NYSE: SNY) yields 3.3% while Total (NYSE: TOT), France’s third-largest oil company, yields 5.1%. Those yields are well in excess of U.S. equivalents, such as Dow components Johnson & Johnson (NYSE: JNJ) and Exxon Mobil (NYSE: XOM). [France ETF as a Dividend Play]
The iShares MSCI France ETF (NYSEArca: EWQ) has a trailing 12-month yield of 3.1%. Other single-country ETFs offer exposure to growing international dividends, particularly of the European variety. On a regional basis, North American dividends rose 15% to $392 billion, but U.K. firms once again offered excellent dividend growth. Payouts there surged 31% to $135 billion, according to Henderson Global Investors.
The Deutsche X-Trackers MSCI United Kingdom Hedged Equity ETF (NYSEArca: DBUK) not only offers investors exposure to the benefits of the U.S. dollar strengthening against the British pound, but the ETF is home to some of the U.K.’s largest dividend payers. For example, DBUK devotes a combined 11.6% of its weight to Royal Dutch Shell (NYSE: RDS-A) and BP (NYSE: BP), which like American rivals Exxon Mobil and Chevron (NYSE: CVX), have been able to dodge dividend reductions even as oil prices have stumbled. [Sterling Slippage Helps These ETFs]
AstraZeneca (NYSE: AZN) and GlaxoSmithKline (NYSE: GSK), which on average yield over 5%, are also top 10 holdings in DBUK. [ETFs for British Dividend Growth
The WisdomTree DEFA Equity Income Fund (NYSEArca: DTH) has a combined weight of about 62% to the U.K., Australia, France, Germany and Japan – countries where benchmark equity index yields exceed 10-year bonds.
DTH tracks the WisdomTree DEFA Equity Income Index, which includes the highest yielding 30% of the WisdomTree DEFA Index and weighs those firms on the basis of annual cash dividends paid. The $333.6 million DTH has a distribution yield of 3.53%, which is slightly higher than the yield on the MSCI EAFE Index.
WisdomTree DEFA Equity Income Fund