Investors looking for added equity income at a time of still low interest rates throughout the developed world can consider international dividend exchange traded funds. A compelling option from that group is the O’Shares FTSE Russell International Quality Dividend ETF (NYSEArca: ONTL).
The O’Shares FTSE Russell International Quality Dividend ETF debuted in March and “is designed to be a core investment holding, providing cost efficient access to a portfolio of large cap high quality, low volatility, dividend paying international companies (ex US) selected based on fundamental metrics,” according to O’Shares Investments.
ONTL’s emphasis on quality metrics positions investors for steady dividend growth while potentially steering clear of companies that could cut or suspend dividends. Companies with wider profit margins are better positions to grow and maintain dividends than those with slimmer margins. Additionally, firms that can meet debt obligations and day-to-day liquidity needs are better capable of maintaining dividends.
ONTL “can be used to augment or complement yield-weighted dividend ETFs because this funds takes a different approach. While ONTL yields over 2.7%, this international dividend ETF takes steps to avoid risky high-yield stocks,” reports InvestorPlace.
Specifically, the quality factor is based on profitability, efficiency, earnings quality and limited leverage, which have historically been a good way to separate good companies from weaker ones. A volatility screen is also in place to focus on stocks that exhibit lower volatility, which tend to perform better.
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.
“The U.K., Switzerland and France combine for about 41% of ONTL’s roster. ONTL turns one year old in late March, so its track record is not lengthy, but the fund’s emphasis on quality stocks positions it well for future dividend growth,” according to InvestorPlace.
The healthcare and industrial sectors combine for over 31% of ONTL’s weight while the consumer staples and consumer discretionary sectors combine for over 23%.
ONTL has an annual expense ratio of 0.48%, or $48 on a $10,000 investment.
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