Last year, global dividends surged 9.30% to $1.37 trillion and growth is expected to be solid again this year. While many U.S. investors often focus on domestic dividend payers, there are compelling opportunities outside the U.S. with international dividend stocks.
For investors wanting to focus on ex-US developed markets dividend names, the ProShares MSCI EAFE Dividend Growers ETF (CBOE: EFAD) is an exchange traded fund to consider. 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.
“Emerging markets, Japan and North America performed strongly, though Europe lagged behind, while 13 countries delivered record payouts, including Japan, the US, Canada, Germany and Russia,” reports Investment Week.
Following a dividend growth offshoot of the famous MSCI EAFE Index, EFAD focuses exclusively on developed markets. The fund allocates a combined 40.53% of its weight to the U.K. and Japan while Australia and Japan combine for almost 19%.
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.
Strong International Dividend Growth
“Japan saw the second fastest growth, largely attributable to higher company profits and rising payout ratios,” according to Investment Week.
Home to scores of cash-rich companies and with a dividend yield that is lower than other major developed markets, Japan has the room to be a major driver of developed markets dividend growth in the coming years.
Last year, European dividend growth was more modest, but still solid.
“European dividends however, rose more slowly, up 5.4% on an underlying basis. They were held back by slow growth in Switzerland and a big cut from Anheuser Busch in Belgium. Nonetheless, 90% of European companies increased their dividends with strong performance from Germany, France and Spain. Headline growth benefited strongly from positive exchange-rate effects earlier in the year,” reports Investment Week.
EFAD is up 8.52% year-to-date.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.