Experienced dividend investors know the utility of adding some international holdings to their income portfolios, whether by way of individual stocks or exchange traded funds (ETFs).
The explanation is straight forward: Ex-U.S. developed market dividend payers often feature larger yields than their U.S. counterparts, an assertion proven by comparing large- and mega-cap dividend stocks from familiar dividend sectors such as consumer staples, energy, financial services and telecommunications.
An option to consider among international dividend ETFs is the iShares International Select Dividend ETF (NYSEArca: IDV). IDV requires that components be taken from developed countries in Europe, Pacific, Asia and Canada. Securities must also meet dividend payout consistency and growth metrics, along with profitability and minimum liquidity levels. Holdings are then weighted by dividend yield.
Low interest rates in the U.S. have sent investors flocking to dividend stocks and exchange traded funds in recent years. With central banks throughout the developed world paring rates and engaging in monetary easing, government bond yields are falling, giving investors good reason to consider international dividend ETFs.[related_stories]
“For comparison purposes, the iShares Select Dividend ETF (DVY) sports a yield of 3.27%. That means IDV offers a 60% higher dividend rate versus its U.S.-focused peer. Income from this ETF is paid on a quarterly basis as well,” according to ETF Daily News. “Probably of greater importance to this discussion is the performance of IDV, which Barclays lists on their website as +0.71% annualized (total return) over the last 5 years through May 31, 2016. DVY has returned 12.68% annualized during that same time frame.”