Global dividend growth was impressive again last year, but the pace slowed a bit, indicating investors ought to consider ETFs that have avenues for identifying the best dividend growth prospects. When it comes to ex-US equities, the FlexShares International Quality Dividend Dynamic Index Fund (NYSEArca: IQDY) is a name to consider.
Global dividend payouts set a record of more than $1.4 trillion in 2019. That’s the good news,” reports Lawrence Strauss for Barron’s. “The bad: Dividend growth slowed considerably from the pace of the previous two years, according to the latest survey of these trends by asset-management firm Janus Henderson.”
IQDY’s screening process evaluates dividend-paying stocks across a number of various factors and ranks those on a sector basis and compares firms on both a regional and sector basis. In this way, the screen compares like firms against one another and also serves to pick out those in every country and sector that support diversification through the construction process.
For yield hunters, the process works because IQDY has a trailing 12-month dividend yield of 3.93%, well above the yields on the S&P 500 or the MSCI EAFE Index.
A Dynamic Idea Up For Comparison
Ex-U.S. developed market dividend payers often feature larger yields than their U.S. counterparts, an assertion proven by comparing large- and mega-cap dividend stocks from familiar dividend sectors such as consumer staples, energy, financial services, and telecommunications.
That said, IQDY has high quality traits as the financial services, technology, and consumer discretionary sectors combine for 44% of its roster. In international markets, those groups are prime sources of dividend growth.
“Overall, though, dividend growth was pretty respectable, even if it slowed,” according to Barron’s. “Excluding the impact of currency translation and other adjustments, global dividends increased by 5.4% last year.”
Investors should still do their due diligence when selecting international dividend stocks to limit risks. Consequently, FlexShares argued that dividend investors should look to a company’s core financial health to better evaluate the likelihood that it will continue to increase its future dividends.
IQDY components must show management efficiency or firms that efficiently deploy capital and make smart financing decisions. Companies with wider profit margins are better positions to grow and maintain dividends than those with slimmer margins. Additionally, firms that can meet debt obligations and day-to-day liquidity needs are better capable of maintaining dividends.
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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.