More International Dividend ETFs Your Broker Forgot to Mention
Dividend ETFs are still in style. In March alone, dividend ETFs attracted $3 billion in assets, according to iShares data.
With U.S. equity-based ETFs attracting over $37.3 billion in assets in the first quarter, it is fair to say U.S. dividend funds are leading the way in that ETF sub-segment.
Of course, there are some credible options among international dividend ETFs as well. The advantage here is that not only do investors gain international portfolio diversity, but, in many cases, higher yields as well.
Income investors looking for some global exposure should give the following unheralded funds a look.
Guggenheim International Multi-Asset Income ETF (NYSE: HGI)
The Guggenheim International Multi-Asset Income ETF has a couple of strikes against it, notably that it is down one percent year-to-date and volume in the fund is just 20,500 shares per day. Fans of superficial ETF metrics can at least find some comfort in knowing HGI has almost $120 million in assets under management.
More importantly, HGI has a 30-day SEC yield of 4.55 percent. The ETF is comprised of global REITs, master limited partnerships, Canadian royalty trusts, American depositary receipts of emerging market companies and U.S. listed closed-end funds that invest in international companies and must always hold at least 40 percent of its portfolio in non-U.S. equities, according to Guggenheim.
As of the end of the fourth quarter, the U.S. was HGI's second-largest country weight at 15.4 percent behind the 19.2 percent allocated to the U.K. Hong Kong, Japan and France round out the ETF's top-five country weights. There is slight emerging markets exposure in the form of a 5.8 percent combined weight to Brazil and Chile.
HGI is benchmarked to the MSCI EAFE Index, the index tracked by the highly popular iShares MSCI EAFE Index Fund (NYSE: EFA). EFA has outperformed HGI over the past year, but in 2012 HGI was nearly 100 basis points less volatile than the MSCI EAFE Index, according to Guggenheim data.
Guggenheim S&PGlobal Dividend Opportunities Index ETF (NYSE: LVL)
The Guggenheim S&PGlobal Dividend Opportunities Index ETF is smaller than HGI ($63.7 million in AUM), but more heavily traded (ADV of 56,200 shares). LVL has also traded slightly higher this year, probably due in large part to the fact that the U.S. is the ETF's largest country weight at almost 16.6 percent. Australia checks in second at almost 11.4 percent and Aussie stocks have been sturdy this year as well.
LVL does have a whopping 7.07 percent 30-day SEC yield, but there are a couple of things to consider regarding that yield. First, LVL is not all that diverse at the sector level, though it high-yielding foreign telecoms account for 23.7 percent of the ETF's weight. Adding to the risk profile is a 22.5 percent weight to financials. Typical dividend sectors such as consumer staples, health care and utilities are arguably under-represented in this ETF.
Further contributing to the high yield is LVL's Eurozone-heavy country allocations. France and Germany combing for nearly 17 percent of the ETF's weight is one thing, Spain, Portugal and Italy combing for 14.6 percent is another matter altogether.
Still, it is important to note LVL is weighted by yield and that does not necessarily mean a bad ETF. LVL is up 3.7 percent in the past six months, which is not dreadful. However, the yield weighting can lead to an increase in volatility and that is the case with LVL, which has been slightly more volatile than the MSCI World Index, according to Guggenheim data.
WisdomTree Japan SmallCap Dividend Fund (NYSE: DFJ)
The WisdomTree Japan SmallCap Dividend Fund is not going to wow anyone with its yield, which is just half a percent on a 30-day SEC basis. Although Japan is not one of the premier dividend destinations in the developed world, DFJ does offer plenty of utility.
First, DFJ is not all that volatile. In fact, the ETF fits the bill as "low beta" with a beta of just 0.36 against the S&P 500, according to WisdomTree data. Second, the weak-yen induced rally in Japanese equities has been good news for small-caps as well. DFJ is up almost 13 percent in the past 90 days.
DFJ does not offer a USD/JPY hedge, but it is levered to the export story as industrial and discretionary names combine for over 46 percent of the fund's weight. DFJ has $187.3 million in AUM and an annual expense ratio of 0.58 percent.
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