International Dividend ETFs Yielding 6%

ETF Trends

Investors on the prowl for income might want to consider dividend ETFs for international markets that are yielding 6% or more.

“Even though the yield on the 10-year Treasury bond has fallen from its near 3% level this week, many overseas securities still yield far more than 3%, making them potentially appealing for U.S. income seeking investors,” said Todd Rosenbluth, S&P Capital IQ Director of ETF Research, in a recent note.

ETFs in the international dividend category include First Trust Dow Jones Global Select Dividend Index Fund (FGD) and SPDR S&P International Dividend ETF (DWX).

“Among the numerous benefits of ETFs is that they offer exposure to a wide range of stocks with a common investment theme and at a low cost. Of course not all holdings of dividend ETFs will be the same, since they seek to track different indices, and as such, the ETFs will have different country and sector exposures,” Rosenbluth wrote.

SDY charges an expense ratio of 0.45% and holds assets of $1.3 billion. The fund is paying a 30-day SEC yield of 6.55%, according to manager State Street Global Advisors.

FGD, sponsored by First Trust, was paying a 30-day SEC yield of 6.38% at the end of August. The net expense ratio is 0.60% and the ETF holds net assets of about $354 million.

Rosenbluth profiles the international dividend ETFs:

  • FGD — First Trust Dow Jones Global Select Dividend ETF seeks to track a Dow Jones developed market index that is constructed using companies that have provided relatively high dividend yields. For inclusion, a company must have increased its dividend compared to its last three year average and there’s also a focus on the company’s dividend payout ratio. FGD has an above-average 12-month yield of 5.0%, and while it has 19% of its assets in U.S stocks, companies domiciled in Australia, United Kingdom, France and Canada are also well represented. From a sector exposure perspective, Telecom Services, Industrials, and Financials stocks have the largest weightings.
  • DWX — SPDR S&P International Dividend seeks to track an S&P index that measures the highest dividend yielding stocks in a broader S&P broad market index, which includes emerging market exposure. The 12-month yield, at 6.8%, is higher than FGD due to exposure to China and South Africa among others and different criteria for constituents. Unlike FGD, DWX holds companies based on their earnings growth, but not payout of earnings. The standard deviation for the ETF is 20. While Australian companies again are well represented in DWX, Canadian and Finnish companies make up more the portfolio relative to FGD. Meanwhile, Financials and Telecom Services stocks comprise large weightings here.

The opinions and forecasts expressed herein are solely those of John Spence, 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.

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