European equities and the relevant Europe ETFs are among this year’s best-performing developed market assets.
For income investors, the good news is some European dividend strategies are delivering solid returns as well, often with higher yields than equivalent US-focused products.
Like other developed markets, many European markets, both in and out of the Eurozone, are home to major equity benchmarks with higher dividend yields than the S&P 500. The yield disparity between European stocks and bonds has been widening as recent global uncertainty pushed investors out of the equities market and into safe-haven fixed-income assets.
The First Trust STOXX European Select Dividend Index Fund (NYSEArca: FDD) is fund to consider for income investors looking for some extra compensation with their European investments.
FDD slices the STOXX Europe 600 Index into a group of 31 components weighed by dividend yield. In FDD, components are capped at a weight of 15% and weighted by dividend yield.
“Up 13.4% year-to-date, the $522.1 million FDD features a conservative collection of European nations with the U.K., France and Switzerland combining for over 61% of this income ETF’s geographic weight. Top holdings include names like Royal Dutch Shell plc (ADR) (NYSE: RDS.B) and AstraZeneca plc (ADR) (NYSE: AZN),” according to InvestorPlace.
Just as there is with U.S. large-caps, there are legitimate dividend growth stories with some U.K. companies, some of which are already familiar to investors on this side of the Atlantic. Investors can use exchange traded funds to access some of those names. The U.K. and Switzerland are two of the top European dividend growth markets. Those countries are a combined 40.5% of FDD’s roster.
FDD’s index yields just over 5%. This year, international stocks are beating their U.S. counterparts as both the widely followed MSCI EAFE Index and the MSCI Emerging Markets Index are topping the S&P 500. Several of this year’s top asset-gathering ETFs are ex-US developed and emerging markets funds.
The European economy is steadily improving, supported by a wide range of indicators, which may lead to above average growth for the remainder of the year and into the next. Eurozone growth has accelerated, with growth and business indicators showing positive results.
Investors have added nearly $325 million in new assets to FDD this year.
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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.