Get High Dividend Exposure with the HDEF ETF | ETF Trends

Getting international diversification can bring yield-starved investors better fixed income options compared to safe haven domestic bonds, but it’s also a good idea to hedge against currency risk when looking overseas. Enter the Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF).

“Income investors and retirees love stocks that pay high dividends,” a article explained. “However, it’s not quite as simple as running a screener to identify the stocks with the best dividend yields. Investors need to understand how much cash flow they should expect in the future and whether or not a company’s distributions are sustainable.”

HDEF offers broad exposure to developed markets outside of the U.S., but with a twist: it looks for stocks that pay high dividends compared to their price, and then hedges out the currency exposure that an investment in international equities brings. This delivers isolated exposure to the performance of the underlying equities in local prices.

Currency fluctuations can be a significant driver of gains and losses, and some investors may prefer the potential diversification benefit of exposure to non-U.S. dollar investments. ETF investors can get this high dividend exposure with a hedging component built in at just a 0.20% expense ratio with HDEF.

HDEF’s strategy is able to extrapolate the highest-yielding equities and mitigate currency risk. A high dividend, cost-effective strategy is certainly a win-win.

The fund is up about 14% within the past year:

HDEF Chart

Leverage Unilever with HDEF

HDEF’s current top holding is Unilever PLC, which operates in the consumer staples sector. Per a Stock News article, the “consumer goods industry has been one of the most stable industries during the pandemic, owing to the demand inelasticity of the sector’s products.”

“In fact, the industry witnessed surging demand in the initial days of the pandemic, with people panic shopping and hoarding essentials,” the article added further. “As a result, dividend-paying companies in the industry have been able to maintain their dividend payments despite the pandemic’s disruptions. Also, market uncertainty and the Fed’s accommodative monetary policy have helped dividend yielding stocks deliver decent returns.”

As for the Unilever holding itself, the article was effusive in its praise for the company’s dividend performance:

“UL pays $1.83 in dividends annually, yielding 3.02% on its current price. It paid a dividend of $0.48 on October 29, 2020,” the article said.

“Analysts expect UL’s revenues to grow 8.8% year-to-year to $62.38 billion in the fiscal 2020 (ended December 31),” it added. “The consensus EPS estimate of $3.12 for the fiscal 2021 (ending December 31) indicates a 17.1% improvement year-over-year. Furthermore, analysts expect UL’s EPS to grow at a rate of 6.9% per annum over the next five years. UL has gained 8.8% over the past six months.”

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