A Joe Biden win will assist European equities, according to some market observers. That could provide an assist to exchange traded funds, such as 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%.
“Strategists have begun outlining how various outcomes may impact European equities, with particular focus on what Biden’s policies might mean, as a Trump win would likely maintain the status quo,” reports Callum Keown for Barron’s.
No ‘Dog Days’ Here
Stocks in Europe and other 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 with relatively high 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 hooking in 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.
“This is due to potentially reduced trade uncertainty, stronger U.S.-Europe ties and major fiscal stimulus, which all seem more likely under a Democratic administration,” Barron’s said. It would also boost the reflation trade and help the rotation to Rest of the World equities and value stocks,” according to Barclays.
UBS believes that if Biden wins, European banks, utilities, real estate and some industrial names could benefit. IDOG doesn’t feature real estate exposure, but those other three sectors combine for roughly a third of the ETF’s roster.
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.
