However, the concern surrounding Australian dividends mainly centers around mining stocks and the materials sector represents just 2.7% of FGD’s weight. Most of the ETF’s Australian holdings are financial services names where dividends are expected to remain solid this year. [Australia for the Patient Investor]
Still, Australian stocks are expensive, at least according to Goldman Sachs.
“Finding value in the Aussie equity market has never been harder; at an average of 19x forward P/E, Industrial stocks have never been this expensive: Growth had already re-rated, but now even ‘cheap’ stocks trade at unprecedented multiples; Seeking defensives with some valuation support, we upgrade Staples to Overweight from Neutral,” said the bank in a recent note.
If there is a drawback to FGD, it is easy to spot: The large, combined weight to telecom and utilities, even if mainly of the foreign variety, implies some of level of vulnerability to rising interest rates. High-yield stocks, particularly from those sectors, are seen as sensitive to rising interest rates. Those sectors combine for over 27% of the ETF’s weight. Most of FGD’s U.S. holdings are utilities stocks. Financial services and energy names combine for 34.5% of FGD’s weight.
First Trust Dow Jones Global Select Dividend Index Fund