Experienced dividend investors know the utility of adding some international holdings to their income portfolios, whether by way of individual stocks or exchange traded funds (ETFs).
The explanation is straight forward: 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.
The iShares International Select Dividend ETF (NYSEArca: IDV) is one of the more venerable names among international dividend ETFs. IDV, which is nearly 10 years old, requires that components be taken from developed countries in Europe, Pacific, Asia and Canada. Securities must also meet dividend payout consistency and growth metrics, along with profitability and minimum liquidity levels. Holdings are then weighted by dividend yield.
“It’s a sound investing strategy that has produced just one hiccup. Investors that got into the fund on day one would have enjoyed a return of next to nothing! There’s no doubt that the overseas markets haven’t enjoyed nearly the run that the U.S. market has, but that 0% return (0.6% average annual return if you want to be exact) can partially be attributed to timing too,” according to ETF Daily News.