Equity market opportunities are sprouting across an array of ex-US developed markets and investors can access that theme in broad-based, income fashion with the ALPS International Sector Dividend Dogs ETF (NYSEArca: IDOG).
For dividend investors looking for mostly developed market ex-U.S. exposure, IDOG merits consideration. ALPS identifies the five highest-yielding securities in the 10 GICS sectors on the last trading day of November. From there, IDOG is rebalanced quarterly in an effort to keep sector weights in the area of 10% and individual holdings at around 2%.
“Investors looking to improve their portfolios’ diversification by investing in stocks outside the United States haven’t had an easy time of it. Non-U.S. equity markets have lagged by a staggering margin over the past decade, with international market benchmarks falling behind their domestic counterparts by about 9 percentage points per year over the trailing 10 years through Aug. 31, 2020,” notes Morningstar analyst Amy Arnott.
IDOG Is Getting Interesting
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.
IDOG may help investors gain improved risk-adjusted returns to European markets by diminishing downside risk while still participating in upside potential. Furthermore, its dividend focus also helps investors focus on quality companies with a history of growing dividends. There are good reasons to consider IDOG over a traditional, broad developed markets ETF.
A primary advantage of IDOG is that it’s diversified at the country level, keep investors away from the risks associated with single-country or region-specific strategies.
“Investors in highly specialized categories–such as funds focusing on Japan, Latin America, Europe, or China–have suffered the biggest investor return gaps, but those investing in broadly diversified categories–such as foreign large blend and world large stock–have fared significantly better,” says Arnott.
IDOG yields north of 5%.
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).
For more on cornerstone strategies, visit our ETF Building Blocks Channel.
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.
