Getting Paid to Play Europe Smart Beta ETFs

The combination of European equities and dividends can prove potent, but investors can add some protection by hedging currency risk. Some ETFs check all those boxes, including the Deutsche X-trackers MSCI Eurozone High Dividend Yield Hedged Equity ETF (BATS: HDEZ).

As many income-minded investors turn to alternative avenues in search for yields, international markets have become a popular destination, but one should be mindful of potential currency risks associated with overseas exposure. Consequently, investors may look to a currency-hedged dividend exchange traded fund to generate yields while mitigating foreign exchange fluctuations.

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.

Overseas investments have gained popularity in recent years as global central banks enacted loose monetary policies to promote economic growth. However, the accommodative central bank measures would depreciate their respective currencies. Consequently, many investors have turned to currency-hedged ETFs to capture the growth and protect themselves against the foreign exchange risks.

“In today’s low-yielding interest rate environment, investors searching for additional sources of income may consider a high-dividend yield approach,” according to Deutsche Asset Management. “High-dividend yielding strategies seek exposure to companies with higher-than-average dividend yields relative to their market-cap-weighted counterparts with the goal of capital preservation and potential long-term capital appreciation. Xtrackers MSCI Eurozone High Dividend Yield Hedged Equity ETF seeks to give investors exposure to high-quality international equities across the Eurozone, and provide an alternative, potentially reliable income stream on a currency-hedged basis.”