U.S.-based investors’ search for dividend-paying stocks is taking them overseas.
S&P Capital IQ expects dividends to be a bigger driver of international equity total returns through year-end as capital appreciation likely slows in the wake of such a strong start to the year. According to Alec Young, Global Equity Strategist for S&P Capital IQ, ” higher valuations and signs that growth is slowing from Brazil to China to beleaguered Europe drive out more cautious international views today compared to our more bullish stance in December, before the surge.”
The start of 2012 for overseas stocks was looking good out of the gates. The MSCI EAFE and MSCI EM indices had risen 11% and 18%, respectively. The indices have since lost some of their momentum, dropping to 9% and 15% respectively, reports Todd Rosenbluth, S&P Capital IQ ETF Analyst, in a recent article on MarketScope Advisor. [Top International ETFs For Dividends]
History has proven that over time, dividends comprise a larger portion of equity total returns in volatile or more sideways markets. Despite the global economic uncertainty investors are faced with today, analysts recommend that even conservative investors allocate 10% to overseas markets. [Dividend ETFs: Searching Overseas for Yield]
Dividend-yielding international ETFs can be appealing to many investors. Here is a rundown of some of the largest funds in this sector:
- iShares Dow Jones International Select Dividend Index (NYSEarca: IDV) A 5% dividend yield and about $900 million in assets add to the allure of this ETF. The portfolio weights heaviest to international financials. utilities and telecom services which are good defensive sectors.
- SPDR S&P International Dividend (NYSEArca: DWX) This fund has a 6.4% dividend yield, and about $800 million in assets. Telecom, consumer discretionary and utilities dominate the top holdings. Ausrtalia, United Kingdom and Germany hold the most weight in this fund.
- WisdomTree DEFA Fund (NYSEArca: DWM) This fund has a yield of 4.2%, and about $360 million in assets. Financials, industrials and telecom are the top weighted sectors, and Japan and the United Kingdom are well-represented. [Best Dividend ETFs]
Tisha Guerrero contributed to this article.