This article was originally published on ETFTrends.com.
Dividend ETF investors should consider foreign yield-generating opportunities as global dividends hit new records.
Global dividends increased 12.9% year-over-year in the second quarter to $497.4 billion, a new record, with records also broken in 12 countries including France, Japan, and the U.S., CNBC reports.
According to the Janus Henderson Global Dividend Index, global dividends have risen by over four-fifths since 2009.
"Rising corporate profitability is driving higher dividend payments in all parts of the world," the global asset manager said in its report, "Exchange-rate effects exaggerated the headline performance. Even so, on an underlying basis, Janus Henderson's measure of core trends, global payouts grew 9.5 percent, the fastest increase in three years."
The strong global dividend growth rates prompted Janus Henderson to raise forecast for 2018 underlying dividend increases from 7.4% to 6.0%. However, the asset manager warned that a strong dollar could offset the improvements.
"Dividends in the second half will be translated at less favorable exchange rates, so Janus Henderson's forecast of $1.358 trillion is unchanged, an increase of 8.6 percent in headline terms year-on-year," according to Janus Henderson.
Furthermore, tariffs and trade war disputes could add to global volatility.
"Even in out-of-favor regions, such as Europe, dividends continue to increase, driven by ongoing economic and earnings growth. Looking further ahead, the impact on global trade of escalating tariff battles with the U.S. could have a negative impact on corporate profitability, though its magnitude is highly uncertain at present," Ben Lofthouse, head of global equity income at Janus Henderson, said in the report.
Nevertheless, income-minded investors may gain exposure to the more attractive dividends out of global markets through targeted ETF strategies. An option to consider among international dividend ETFs is the iShares International Select Dividend ETF (CBOE:IDV) . IDV requires that components be taken from developed countries in Europe, Pacific, Asia and Canada. Securities must also meet dividend payout consistency and growth metrics, along with profitability and minimum liquidity levels. Holdings are then weighted by dividend yield. IDV has a 4.64% 12-month yield.
The WisdomTree International SmallCap Dividend Fund (DLS) is another option, except this ETF specifically screens for dividend-paying small-caps to help investors satisfy demand for income, along with growth potential. DLS has a 3.31% 12-month yield.
The FlexShares International Quality Dividend Index Fund (IQDF) takes a quality approach to ex-US dividend payouts. IQDF screens for management efficiency, profitability and cash flow. Each company has to show management efficiency, or firms that efficiently deploy capital and make smart financing decisions. Companies with wider profit margins are better positions to grow and maintain dividends than those with slimmer margins. Additionally, firms that can meet debt obligations and day-to-day liquidity needs are better capable of maintaining dividends. IQDF has a 4.65% 12-month yield.
ETF investors interested in dividend-focused stock exposure outside the U.S. can also look to the SPDR S&P International Dividend ETF (DWX) . The U.K., Australia and Canada, solid ex-U.S. developed market dividend destinations, combine for the bulk of DWX’s weight, and the ETF also includes emerging market exposure. DWX follows its own liquidity, profitability and dividend growth criteria. The index also weights components by dividend yield. DWX has a 4.40% 12-mont yield.
For more information on yield-generating stocks, visit our dividend ETFs category.
POPULAR ARTICLES FROM ETFTRENDS.COM
- Shark Tank Star Barbara Corcoran on Regretful Purchases
- Ex-Google Exec on Elon Musk’s Strengths and Flaws
- What’s New With the Home Office Tax Deduction
- 11 Financial Questions with Uncommon Answers
- 20 Most Desirable Cities in America … Should You Be a Buyer?