While U.S. companies have boosted their cash payouts to shareholders, income-minded investors are still seeking out attractive foreign dividend stock and related exchange traded funds. Some advisors are looking overseas for high yields and renewed dividend growth.
Dividends help investors generated greater total return or cushion declines during down markets. Dividends also offer investors a more attractive alternative to fixed-income assets in a stubbornly low interest rate environment. Additionally, David Ruff, a portfolio manager at Forward Management, argues that dividend payers are more disciplined in how they spend money, which can lead to better performance. [Diversify With Dividend ETFs]
ETF investors interested in dividend-focused stock exposure outside the U.S. have a number of options, including the SPDR S&P International Dividend ETF (NYSEArca: DWX). The $934.5 million DWX, which debuted more than seven and a half years ago, has a trailing 12-month dividend yield of nearly 5.8 percent.
The U.K., Australia and Canada, solid ex-U.S. developed market dividend destinations, combine for the bulk of DWX’s weight. DWX follows its own liquidity, profitability and dividend growth criteria. The index also weights components by dividend yield. Unlike the previous two offerings, DWX also includes emerging markets.
“I ran a regression on the returns for DWX compared to the S&P 500 going all the way back to February of 2008. The annualized volatility for DWX was materially higher at 27.8% compared to 22.3% for the S&P 500. On top of much higher values for annualized volatility, the total return was a negative 21.0% compared to the S&P 500 being up 82%. I expect international allocations to have suffered quite materially relative to domestic equity, but the this is a long period in for a total return of negative 21%,” according to a Seeking Alpha analysis of DWX.