Getting Paid to Minimize Currency Risk

The WisdomTree International Hedged Dividend Growth Fund (NYSEArca:IHDG) targets dividend growers in developed markets, excluding the U.S. and Canada and features a currency hedge that can protect investors in the event the dollar rebounds around developed market currencies.

Low interest rates in the U.S. have sent investors flocking to dividend stocks and exchange traded funds in recent years. With central banks throughout the developed world paring rates and engaging in monetary easing, government bond yields are falling, giving investors good reason to consider international dividend ETFs.

U.S. investors, though, may still be exposed to currency risks ahead, or a strengthening U.S. dollar and depreciating foreign currencies, which could weigh on overall dollar-denominated returns of international investments.

IHDG’s “portfolio targets 300 developed-markets stocks that score high on various measures of quality, including long-term estimated earnings growth, return on equity, and return on assets. The emphasis on these metrics tilts the portfolio toward companies with more-durable competitive advantages and causes the fund to have a growth orientation,” said Morningstar in a recent note.

IHDG, which carries an annual expense ratio of 0.58%, tracks the WisdomTree International Hedged Dividend Growth Index (WTIDGH). That index is an offshoot of the WisdomTree DEFA Index.