Plenty of markets outside the U.S. offer investors compelling opportunities for high dividend yields and payout growth, but with global dividend growth expected to slow this year, investors need to be selective when scouring international markets for income investments.
The ProShares MSCI EAFE Dividend Growers ETF (CBOE: EFAD) can help investors access a basket of dependable developed market dividend growers. EFAD tracks the MSCI EAFE Dividend Masters Index, a dividend growth offshoot of the widely followed MSCI EAFE Index. EFAD’s 54 holdings have minimum dividend increase streaks of 10 years.
EFAD may help investors gain improved risk-adjusted returns to European markets by diminishing downside risk while still participating in upside potential. Furthermore, its dividend focus also helps investors focus on quality companies with a history of growing dividends. There are good reasons to consider EFAD over a traditional, broad developed markets ETF.
“Historically, companies in the MSCI EAFE that grew their dividends outperformed those that didn’t,” according to ProShares.
Other Perks
Stocks in Europe and in international developed markets often have higher yields than those in the U.S. That means it’s possible to take advantage of a dividend growth strategy and relatively high dividend yields. International dividend growth stocks also come without the added U.S. interest rate sensitivity of high dividend paying stocks.
EFAD’s dependability could be another perk for investors at a time when dividend growth is expected to moderate.
“While these payments have been a boon to total returns, especially as stock prices have continued to rise, according to one company, dividends increases are expected to slow in 2019. IHS Markit, a London-based research firm, says that aggregate dividends among globally listed companies will rise by 6% this year, down from 14.3% in 2018 and 9% in 2017,” reports Money Sense.
EFAD is also delivering on its potential to outperform non-dividend EAFE strategies. As has been widely documented international stocks struggled last year and the MSCI EAFE Index is 15% overt the past year, a decline that is about 50% worse than EFAD’s over the same period. Ex-US developed markets are rebounding this year, but again, EFAD is outperforming the EAFE benchmark.
Japan, the U.K. and Australia combine for over 38% of EFAD’s geographic exposure.
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