ETFs to Access Europe's Growing Dividend Payers

Europe dividend-related exchange traded funds could gain momentum as the European Central Bank (ECB) expects to lift restrictions on dividend payments and share buybacks for banks.

Following the Federal Reserve’s latest decision to end coronavirus pandemic-induced limits on payouts, the ECB believes banks are resilient enough to resume distributing capital back to shareholders, the Wall Street Journal reports.

Andrea Enria, head of banking supervision at the ECB, told European Parliament members at a hearing that the economic outlook in Europe is improving and banks have strong levels of capital. Bank profitability has also rebounded after they had to set aside money to cover potential loan defaults during the worst of the coronavirus pandemic fallout.

“In the absence of materially adverse developments, we plan to repeal our recommendation as of the end of the third quarter of 2021 and return to reviewing dividends and share buybacks as part of our normal supervisory process,” Enria told the European Parliament.

Dividend payments has been particularly important for Eurozone banks, especially since they are seeking mechanisms to attract investors after years of struggling to generate profits in response to sluggish economic growth and the negative interest rate environment.

Investors interested in the Europe dividend play may look to a number of targeted ETF strategies. For instance, the First Trust STOXX European Select Dividend Index Fund (NYSEArca: FDD) and WisdomTree Europe Quality Dividend Growth Fund (NYSEArca: EUDG) capture large dividend-paying European companies, while the WisdomTree Europe SmallCap Dividend Fund (NYSEArca: DFE) follows small cap Europe dividend stock exposure.

The ProShares MSCI Europe Dividend Growers ETF (BATS: EUDV) is comprised of companies that have consistently increased their dividends for at least 10 consecutive years.

Additionally, the O’Shares Europe Quality Dividend ETF (NYSEArca: OEUR) includes European global leaders with strong profitability, balance sheets, and dividend growth, a potentially lower risk way to invest.

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