Income investors love a steady paycheck. The predictability of monthly dividends is a comforting factor that has become a more prominent tactic for many income-oriented ETFs that own U.S. stocks.
This can be a decision-maker for those that want their stock portfolio to produce consistent cash flow rather than the lumpy quarterly payments that most equity funds are known for.
In overseas markets, it is much more difficult to obtain this reliable stream of income. Foreign companies tend to distribute capital to shareholders on a more sparse and unpredictable basis. Semi-annual payments and special dividends are more the norm than the exception in international markets. Even when the company is specifically known to carry a high dividend payout ratio.
For that reason, there are just a small group of select exchange-traded funds that offer the ability for investors to own international stocks and receive that monthly check.
Global X MSCI SuperDividend EAFE ETF (EFAS)
EFAS is part of the Global X Super Dividend series of funds that identifies 50 of the highest dividend paying equities present in the MSCI EAFE Index. It launched in late 2016 and has largely flown under the radar with just $4 million in total assets. The fund has a current 30-day SEC yield of 5.09% and charges a net expense ratio of 0.55%. One of its most distinctive qualities is the distribution frequency of those dividends, which is set to monthly.
EFAS has achieved similar returns to its parent index, the iShares MSCI EAFE ETF (EFA) over the last year with a total return of +14.77%. It’s also notable that the yield of EFAS is more than double that of EFA, which is an attractive feature for those seeking above-average income.
Global X MSCI SuperDividend Emerging Markets ETF (SDEM)
Those that are looking for emerging market dividend stock exposure may opt to consider SDEM in their research. This fund is tightly related to EFAS in that it owns a niche group of 50 high yield emerging market stocks. It’s top country allocations at present include: South Africa, Russia, Brazil, and Taiwan.
SDEM carries a similar 30-day SEC yield of 4.84% and income is paid monthly to shareholders. The fund also charges an expense ratio of 0.66% to implement its investments strategy and is still quite small with $15 million in total assets.
iShares International Preferred Stock ETF (IPFF)
Preferred stocks straddle that no-mans land between equity and debt that is often overlooked when seeking pure common stock exposure. Nevertheless, a fund such as IPFF may be desirable for those looking to further diversify their asset class exposure and return profile in overseas markets.
The fund tracks an index of over 100 preferred securities in non-U.S. developed markets. The majority of the exposure (nearly 80%) is derived from the Canadian financial sector, followed by a smattering of banks in the United Kingdom.