Global markets have garnered greater attention this year as more look to options outside of pricier U.S. equities. Dividend-minded investors may also tap into the opportunities in international markets with a quality ETF strategy.
For instance, the ProShares MSCI EAFE Dividend Growers ETF (BATS: EFAD), which tracks developed market Europe, Australasia and Far East companies that exhibit a minimum dividend increase streak of 10 years, increased 17.7% year-to-date while the S&P 500 gained 13.4%. EFAD also comes with a 2.18% 12-month yield.
EFAD may help investors gain improved risk-adjusted returns to European markets by diminishing downside risk while still participating in upside potential. Furthermore, its dividend focus also helps investors focus on quality companies with a history of growing dividends.
“Companies that consistently grow their dividends tend to be high-quality companies with the potential to withstand market turmoil and can still deliver strong risk-adjusted total returns over time,” according to ProShares. “Companies that cut or suspend a dividend may have cash flow problems or too much debt on the books. Investing in the companies that have not only paid dividends but have consistently grown them over time has historically been an effective way to outperform the market.”
Dividends are viewed as a reflection of management confidence in the company’s earnings, balance sheet and performance potential, and dividend growers are among an elite group of dividend payers.
Furthermore, if your focus is on dividends, a good way to access higher yields may lie outside of the United States. Stocks in Europe and in international developed markets often have higher yields than those in the U.S. That means it’s possible to take advantage of a dividend growth strategy and relatively high dividend yields. International dividend growth stocks also come without the added U.S. interest rate sensitivity of high dividend paying stocks.
For more information on European markets, visit our Europe category.