The U.S. gets most of the attention when it comes to global dividend growth, but Europe is home to some impressive dividend growth markets, too, many of which are accessible via exchange traded funds (ETFs) such as the ProShares MSCI Europe Dividend Growers ETF (CBOE: EUDV).
EUDV can help investors access European equities with steady track records of rising payouts. EUDV tracks the MSCI Europe Dividend Masters Index, which requires member firms to have boosted payouts for at least 10 consecutive years.
Valuations still look attractive relative to domestic stocks. On a forward earnings basis, European stocks have gotten cheaper continually since 2015, and price-to-book value for the region shows European names trading at a multi-year discount to the U.S.
Some market observers believe “that European stock dividends are trading too cheaply and that a surer way to make money amid the political uncertainty is to capitalize on the discrepancy between the price of European stock dividends, which U.S. investors can trade by buying dividend futures on the Euro Stoxx 50 index, and the forecasts for payouts from European companies,” reports Anita Raghavan for Barron’s.
Inside EUDV ETF
EUDV allocates 37.64% of its weight to the U.K., one of Europe’s most reliable dividend growth markets.
“Dividends paid to holders of UK shares jumped to a record high in the first three months of the year, putting investors on track for £100bn in payouts this year,” reports The Guardian. “The payments rose 15.7% to £19.7bn, easily a first-quarter record, according to data tracked by Link Asset Services.”
France, the second-largest Eurozone economy; and Switzerland, another reliable European dividend growth market, combine for almost 23% of EUDV’s weight.
“Based on current trading levels, Euro Stoxx 50 dividend futures are pricing in more than 3% in dividend cuts each year for the next decade, while forecasts by analysts at Goldman Sachs expect the opposite to happen,” according to Barron’s. “The Goldman analysts are calling for European companies to increase their dividends at an annual rate of close to 5% over the same period.”
Up 12.42% year-to-date, EUDV yields 2.15%, or 30 basis points above the dividend yield on the S*P 500.
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