The third quarter was solid in terms of dividend growth. In the U.S., the number of S&P 500 members boosting dividends rose year-over-year while the number of negative dividend actions (cuts or suspensions) decreased from the third quarter of 2016, according to S&P Dow Jones Indices.
Income investors should also include international dividend stocks in their portfolios, a mission the Deutsche X-trackers MSCI All World ex-US High Dividend Yield Hedged Equity ETF (NYSEArca: HDAW) helps with.
HDAW targets companies with higher-than-average dividend yields relative to their market-cap-weighted counterparts across both developed and emerging countries, excluding the U.S. Moreover, the ETF includes a currency hedge which helps negate the negative effects of weakening foreign currencies or a strengthening dollar on overseas returns. HDAW has a 2.45% trailing 12-month dividend yield.
Yield-seeking investors who are turning toward international markets may want to consider a currency-hedged strategy to limit the negative effects of weakening foreign currencies or a strengthening U.S. dollar on their investment. If a foreign currency weakens, a non-hedged foreign equity position would have a lower U.S. dollar-denominated return.
Indeed, the dollar has been a disappointment among the major currencies this year, weighing on the performances of currency hedged ETFs. However, the dollar has recently been showing signs of life as highlighted by a one-month gain of about 1% percent for the U.S. dollar index. For its part, HDAW is higher by more than 16% over the past year.
HDAW features ample exposure to some of the most dependable ex-US dividend growth markets. For example, the U.K. and Canada combine for almost a third of the ETF’s geographic weight. Germany and France, the Eurozone’s two largest economies, combine for almost 21% of HDAW’s lineup.
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.
HDAW allocates almost 37% of its weight to financial services stocks with the two consumer sectors combining for 19% of the fund’s weight. The ETF holds 257 stocks with the largest holding representing 4.4% of the fund’s roster.
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