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International Stock ETFs Offer More Attractive Dividend Yields


While U.S. companies have boosted their cash payouts to shareholders, income-minded investors are still seeking out attractive foreign dividend stock and related exchange traded funds.

Money managers believe that the most attractive dividend stocks are outside U.S. markets, reports Stan Choe for Boston Globe.

‘The [United States] is an actively hostile dividend market and has been for years,’’ Daniel Peris, senior portfolio manager at Federated Investors, said in the article.

In the U.S., more companies are using their cash hoards to buy back stocks instead of dishing out dividends. Peris points out that in other developed markets, investors expect companies will pay out much more or most of their earnings to shareholders as dividends.

For instance, HSBC Holdings, the largest company in the U.K., paid out 58% of its earnings per share last year in dividends, whereas the average company from the Standard & Poor’s 500 index paid out 35% of earnings as dividends.

Moreover, average yields are higher abroad. For example, U.K. stocks show an average dividend yield of 3.3% while other European markets provide 3.1% yields. The e iShares MSCI United Kingdom ETF (EWU) has a 2.31% 12-month yield and the Vanguard FTSE Europe ETF (VGK) has a 3.75% 12-month yield.

Emerging markets, including Brazil and China, pay out 2.7%. The iShares China Large-Cap ETF (FXI) has a 2.71% 12-month yield and the iShares MSCI Brazil Capped ETF (EWZ) has a 3.11% 12-month yield.

In contrast, the S&P 500 index shows a dividend yield of 2.36%.

Dividends help investors generated greater total return or cushion declines during down markets. Dividends also offer investors a more attractive alternative to fixed-income assets in a stubbornly low interest rate environment. Additionally, David Ruff, a portfolio manager at Forward Management, argues that dividend payers are more disciplined in how they spend money, which can lead to better performance. [Diversify With Dividend ETFs]

ETF investors interested in dividend-focused stock exposure outside the U.S. have a number of options, including the SPDR S&P International Dividend ETF (DWX) , which has a 6.29% 12-month yield, PowerShares International Dividend Achievers Portfolio (PID) , which has a 3.38% 12-month yield, and iShares International Select Dividend ETF (IDV) , which has a 4.56% 12-month yield. [A High Achieving International Dividend ETF]

For more information on dividends, visit our dividend ETFs category.

Max Chen contributed to this article.

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.