Two ETFs For Global Yield
Although 10-year Treasury yields have tumbled 7.1 percent in the past five trading days, uncertainty regarding the future of the Federal Reserve's quantitative easing program lingers and that could lead rates higher yet again.
When 10-year Treasuries were recently flirting with yields of three percent, that yield was not only well above that of the S&P 500, but some popular dividend ETFs as well. For investors, the good news is there are plenty of global dividend ETFs that yield well above three percent.
Related: Nifty New Dividend ETFs.
"S&P Capital IQ Global Equity Strategist Alec Young notes that with the exception of Japan, major foreign stock markets in Europe, Latin America, Canada, Australia and emerging Asia all yield more than their U.S. counterpart, with payouts ranging from 3.0%-4.5%, vs. only 2.0% for the S&P 500 Index. Young adds that the year to date international equity underperformance relative to U.S. stocks has left foreign dividend yields higher due to limited capital appreciation," said the research firm in a new note.
S&P Capital IQ has Buy or Strong Buy ratings on eight American depository receipts that yield more than three percent, including France's Total (NYSE: TOT), Europe's third-largest oil company, and Brazil's Vale (NYSE: VALE), the world' largest iron ore maker. The research is also somewhat encouraged by a pair of international dividend ETFs, one of which is the SPDR S&P International Dividend ETF (NYSE: DWX).
Home to over $1.3 billion in assets under management, DWX earns a Marketweight rating from S&P Captial IQ. DWX charges 0.45 percent per year and sports a dividend yield of 6.72 percent. At the sector level, financial services names dominate DWX with an allocation of 23.5 percent. Telecom and utilities garner weights of 18.5 and 12.6 percent, respectively.
DWX offers exposure to 28 countries, though Australia is by far the largest country weight in the fund at 22.5 percent, two and a half times the allocation given to the U.K.
While DWX is mostly weighted toward developed markets, investors should note the ETF does feature exposure, albeit fractional in some cases, to 10 emerging markets, including South Africa, China and Brazil. Some emerging markets proving to be dividend growers and that could bode well for DWX in the future.
S&P Capital IQ also has a Marketweight rating on the $353.6 million First Trust Dow Jones Global Select Dividend Index Fund (NYSE: FGD). FGD is noticeably different from DWX on several levels. For example, the First Trust offering is a global ETF, not an ex-U.S. fund and that means the U.S. is the fund's largest country weight at 17 percent. Australia is next at 16.3 percent. FGD's top-10 country weights, which comprise nearly three-quarters of the fund's weight, are developed markets.
Companies need to meet certain criteria to be included in FGD's lineup, including "having a current-year dividend-per-share ratio that is greater than or equal to its five-year average annual dividend-per-share ratio and a five-year average payout ratio of less than or equal to 60% for U.S. and European companies; or less than or equal to 80% for all other countries," according to First Trust.
FGD, often overlooked in the international dividend ETF conversation, allocates a combined 61 percent of its weight to the telecom, industrial and financial services sectors. The ETF's 30-day SEC yield is almost 6.4 percent and FGD is up 5.2 percent year-to-date.
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