With equity markets in turmoil, the quality factor has yet another chance to stand out and that could be a benefit for investors looking for geographic diversity and steady equity income. The WisdomTree International Hedged Quality Dividend Growth Fund (NYSEArca: IHDG) is a solution to consider.
IHDG targets dividend growers in developed markets, excluding the U.S. and Canada and features a currency hedge that can protect investors in the event the dollar rebounds around developed market currencies. IHDG, which carries an annual expense ratio of 0.58%, tracks the WisdomTree International Hedged Dividend Growth Index (WTIDGH)
“High-quality, sustainable dividend-payers make up a segment of the market that may fare well in a persistent low-growth, the low-interest-rate environment outside the U.S.,” said WisdomTree in a recent note. “Given recent action and signaling by major global central banks, monetary policy looks likely to stay accommodative, making such companies relatively attractive.”
Another IHDG Idea
IHDG’s holdings are weighted by cash dividends paid, a strategy that can prove useful for investors looking to evaluate the consistency and sustainability of a company’s payouts. Since coming to market just over three years ago, IHDG has topped more traditional ex-US developed market strategies while being slightly less volatile.
Another idea to consider is the WisdomTree International Quality Dividend Growth Fund (CBOE: IQDG).
IQDG sets out to capture International Quality Dividend Growth Dividend-paying equities have increasingly become an attractive option for investors looking to generate income and pursue higher total return potential.
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.
There are benefits to the methodology IHDG and IQDG adhere to.
“While this methodology may cause these strategies to lag in a global reflationary environment, it also may strike a balance for investors—mitigating exposure to distressed European and Japanese banks that dominate most value funds, while also having discounted valuations relative to the largest foreign large growth funds,” according to WisdomTree.
Related: A Very Bold Idea Among Energy ETFs
Then there is the possible benefit of international value stocks rebounding.
“We believe U.S. large-cap growth valuations have become increasingly stretched after a recent spell of outperformance. This backdrop has led many investors—WisdomTree included—to call for a mean-reversion period of outperformance for U.S. large-cap value. Valuations of foreign equities are more modest, but growth has similarly outperformed value for an extended period,” said the issuer.
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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.