Dividend data out earlier this month confirms that payouts are approaching levels not seen since prior to the coronavirus pandemic, and the U.S. is grabbing plenty of headlines on this front.
“US dividends, which proved more resilient than those in many parts of the world during the onset of the pandemic last year, climbed 10% during the third quarter,” according to the latest edition of the Janus Henderson Global Dividend Index. “Notably, 97% of US companies raised their dividends or held them steady during the quarter, with companies in the financials, pharmaceuticals, and healthcare equipment and services sectors accounting for one-third of the increase.”
Those are compelling data points, but investors shouldn’t sleep on the resurgence of dividends in ex-U.S. developed markets. The ALPS International Sector Dividend Dogs ETF (NYSEArca: IDOG) is a prime example of an developed markets exchange traded fund benefiting from renewed payout enthusiasm in developed regions outside the U.S.
IDOG, which benchmarks to the S-Network International Sector Dividend Dogs Index, yields 3.56%, well above what investors earn on the MSCI EAFE Index. That’s one source of allure. Another is IDOG’s equal-weight sector methodology. Sector exposures in IDOG range in weight from 7.55–11.45%. A perk is the fund’s nearly 9% weight to the materials sector because, as the Janus Henderson Global Dividend Index notes, mining dividends are driving a significant percentage of global payout increases this year.
“From a regional perspective, the places that had suffered the steepest cuts in 2020 are now showing the biggest rebound. Those most exposed to the mining boom or to the restoration of banking dividends also saw a rapid recovery; Australia and the UK were the biggest beneficiaries of these trends,” according to Janus Henderson.
Australia and the U.K. combine for 24% of IDOG’s roster, and the ALPS fund has a 10.24% weight to financial services stocks. Japan, IDOG’s largest geographic weight at 19.22%, saw its dividends jump more than 25% year-over-year in the September quarter. France, which accounts for nearly 10% of IDOG’s roster, was another source of dividend strength in the third quarter.
“French companies paid the most in Q3 and saw the fastest growth. Payouts almost doubled (+93%) thanks to the second tranche of BNP Paribas’s restored dividend,” notes Janus Henderson.
Other international developed market dividend ETFs include the FlexShares International Quality Dividend Dynamic Index Fund (NYSEArca: IQDY), the ProShares MSCI EAFE Dividend Growers ETF (CBOE: EFAD), and the SPDR S&P International Dividend ETF (NYSEArca: DWX).
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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.
