With ex-US dividend growth perking up and the Eurozone contributing to that upside, the region’s inexpensive equities could be all the more alluring for investors seeking income and international equity diversification.
One way of capitalizing on that trend without going all-in on Europe is with the ALPS International Sector Dividend Dogs ETF (NYSEArca: IDOG). IDOG, which benchmarks to the S-Network International Sector Dividend Dogs Index, provides exposure to 10 European economies.
That’s relevant positioning today because not only are European equities attractively valued but also because the region is finally catching up to the U.S. in terms of coronavirus vaccination rates and earnings growth.
“The economic restart has been broadening beyond the U.S. – aided by an acceleration in vaccine rollouts, particularly in Europe and the rest of the developed world,” notes BlackRock. “This has supported a sharp rise in European corporate earnings revisions from last year’s trough. Earnings revision ratios – the ratio of the number of stocks with corporate earnings upgrades to those with downgrades – are still on the rise in Europe, just as the ratio looks to be stalling in the U.S.”
IDOG Is Interesting for Valid Reasons
The U.K. is IDOG’s third-largest geographic exposure at nearly 12%. Not only are dividends growing there, stocks are inexpensive, and market observers are wagering on more mergers and acquisitions activity.
“Investors are tracking a number of undervalued U.K. companies, including household names in gambling, energy, and fashion, as some of the world’s lowest equity valuations raise the prospect of a new round of takeover deals in the final months of 2021,” reports Bloomberg.
Six Eurozone countries are among IDOG’s geographic exposures, which is relevant to investors because and European Central Bank (ECB) is coming up, and it appears as though the ECB will not be stirred by the Federal Reserve’s tapering talk and is likely to leave easy financing conditions in place. That could be a positive for IDOG.
“The backdrop: easier financing conditions, especially with lower bond yields. Yet concerns that global financial conditions may tighten later this year around the likely start of the Fed’s taper of its asset purchases might persuade the ECB to leave the pace unchanged,” adds BlackRock.
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.