Investing with dividend-oriented picks generates a steady source of income. While many have focused on U.S. stocks, international dividend exchange traded funds also help diversify a domestically centric portfolio.
“Tilting one’s international-equity allocation to dividend-paying companies is a well-supported proposition,” according to Morningstar analyst Abby Woodham. “A strong dividend payout ratio is correlated with higher earnings growth and solid fundamentals, and several studies show that dividend-paying stocks outperform those that do not pay dividends over most time periods.” [Dividend Growth the Emerging Markets Way]
Additionally, the companies that offer consistent yields also act differently during market cycles, which also provide a layer of diversification. Over the long-term, dividend stocks help generate higher returns and help buffer volatility.
“Over the short term, capital appreciation will usually outpace the return from dividend income, but over longer time periods, dividends dominate,” Woodham added. “Dividends have historically accounted for a large component of total return, particularly in bear markets.”
Some international-focused dividend ETFs include:
- dividend payout ratio