The ALPS International Sector Dividend Dogs ETF (NYSEArca: IDOG) is positioned as a high dividend strategy. Alone, that’s relevant simply because interest rates are low throughout much of the developed world and international dividend payers usually sport high yields than their U.S. counterparts.
However, IDOG, which has a distinctly value tilt, is a potentially sneaky avenue to other factors such as quality and dividend growth. Take the case of Japan, IDOG’s largest geographic exposure. For decades, the Land of the Rising Sun wasn’t exactly the Land of Rising Dividends. Japanese firms were notoriously tight-fisted, opting to retain cash rather than engage in shareholder rewards. Fortunately for IDOG investors, that’s a bygone era.
“One in three listed companies in Japan are planning to increase dividend payouts this fiscal year, the largest number in three years, reflecting corporations’ bullish business outlooks,” reports Nikkei Asia.
IDOG: An Idea for Yield and Growth
Proving its payout potency, IDOG yields 2.78%, or 83 basis points ahead of the MSCI EAFE Index. IDOG’s yield implies room for growth and that growth could arrive soon as Japan’s dividend increase outlook is as good as it’s been in more than two years.
“The number of companies expecting to increase their dividend payouts, including those that will resume dividends, rose 4 percentage points to 36%. Those seeking to cut dividends and those that had no dividend plans account for 10%, down 16 percentage points,” according to Nikkei Asia. “The percentage of companies raising dividends is the highest since the fiscal year ended March 2019, when it stood at 48%.”
Though it accounts for 20.24% of the fund’s weight, Japan isn’t the only reason to consider IDOG. The ALPS fund features exposure to a dozen other countries, some of which are home to rising payouts this year. Strength in mining and healthcare equities is supporting payout growth for Australian and Swiss stocks in 2021.
Europe is also expected to join the dividend growth party this year, a relevant point for IDOG investors because 10 of its 13 geographic exposures are European countries. More to the point, ex-UK European payout growth could look impressive by the end of this year and that’s something to consider because IDOG features healthy exposure to Germany and France, among others.
Other international developed market dividend ETFs include the FlexShares International Quality Dividend Dynamic Index Fund (NYSEArca: IQDY), 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.