European ETF Dividend Dynamos
ETFs offering exposure to Europe on both a multi-country and country-specific basis have come roaring back over the past several months. For example, the Vanguard MSCI Europe ETF (NYSE: VGK) is up 6.8 percent in the past month. The iShares MSCI Italy Index Fund (NYSE: EWI) has been even more impressive with a gain of 12.1 percent over the same time.
While the performances of ETFs such as EWI and the iShares Spain Index Fund (NYSE: EWP) have been impressive, those gains do not mean risk has been eliminated from the European investment thesis. Even the European Central Bank's bond-buying plans do not mean Italy is no longer in a recession or that Spain's unemployment rate has dipped from the 20 percent area.
In other words, there is still risk when it comes to investing in Europe, but the region is also still home to a plethora of quality companies. Acknowledging that, investors should not ignore Europe outright. Rather, they should demand compensation for taking on European risk. These high-yielding Europe ETFs deliver that compensation.
First Trust STOXX European Select Dividend Index Fund (NYSE: FDD)
With average daily volume of just under 15,000 shares, it is not surprising the First Trust STOXX European Select Dividend Index Fund leads an anonymous existence. That should not be the case in an environment that has placed heavy emphasis on high-yield investing.
The 31-stock ETF has a 30-day SEC yield of 6.83 percent, according to First Trust data. If there is a strike against FDD, it is not volume, but the ETF's almost 38 percent allocation to financial services names. On the bright side, more than half of the fund's weight is allocated to non-Eurozone countries with the U.K. and Switzerland combining for 50 percent of FDD's total country weight.
FDD, which charges 0.6 percent per year, has surged 6.6 percent in the past month.
WisdomTree Europe Hedged Equity Fund (NYSE: HEDJ)
FDD and the WisdomTree Europe Hedged Equity Fund make for an interesting Europe ETF rivalry, though HEDJ goes about its business in far different fashion.
For starters, HEDJ is looking to capitalize on the rising popularity of ETFs that either exclude financials or offer reduced exposure to the sector. The new version of HEDJ features an 8.25 percent weight to that group, making it just the seventh-largest sector allocation in the fund.
Additionally, HEDJ focuses on European dividend-paying firms that generate the bulk of their revenues outside of the Eurozone. HEDJ in its new form (the ETF formerly featured exposure to countries outside of Europe) does not have a lengthy operating history. However, the ETF has gained 3.8 percent since the start of September and has a 30-day SEC yield of 3.5 percent.
SPDR EURO STOXX 50 ETF (NYSE: FEZ)
With over $1 billion in assets under management, FEZ is far larger than FDD and HEDJ. FEZ also sports a beta of 1.31 against the S&P 500, indicating that this ETF may not be the best choice for ultra-conservative investors.
The elevated beta, can in part be attributed to the ETF's almost 24 percent weight to bank stocks. Along those lines, it should be noted just one bank, Banco Santander (NYSE: SAN), is found among the fund's top-10 holdings.
FEZ offers exposure to eight European nations, but the fund is not diverse at the country level as France and Germany combine for almost 69 percent of the fund's weight. The ETF also sports some attractive statistics including a four percent dividend yield, an expense ratio of 0.29 percent, a forward price-to-earnings ratio below 11 and a price-to-book ratio of just 1.1.
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