Dividends offer investors myriad advantages and that's especially true when it comes to international equities. Not only do many ex-US developed markets sport dividend yields well in excess of the S&P 500, but dividends can also reduce some of the volatility associated with international investments.

Seasoned investors know about the volatility that comes along with international equities. What's often overlooked is the potentially damaging impact of currency volatility on international equity investments. However, like stocks, currencies don't move up or down in straight lines, making it difficult to time when the dollar will rise and fall against various foreign currencies.

Enter dynamic currency hedged ETFs, a new breed of currency hedged funds. And yes, investors can have their dividend cake, too, with the new WisdomTree Dynamic Currency Hedged International Quality Dividend Growth Fund (BATS: DHDG). The WisdomTree Dynamic Currency Hedged International Quality Dividend Growth Fund debuted last week as the newest member of WisdomTree's fast-growing lineup of dynamic currency hedged ETFs.

A Closer Look

DHDG follows the WisdomTree Dynamic Currency Hedged International Quality Dividend Growth Index, an index that combines growth and quality factors and then weights member firms based on annual cash dividends paid.

“The growth factor ranking is based on long-term earnings growth expectations, while the quality factor ranking is based on three year historical averages for return on equity and return on assets,” according to WisdomTree.

If a currency, on a purchasing parity basis, is overvalued relative to the dollar, then DHDG can move closer to being fully hedged. Likewise, if the dollar is overvalued compared to other currencies, hedging becomes less useful.

Hence the phrase “dynamic currency hedging.” A simplistic view of DHDG is that it splits the difference of making a strong dollar bet with a currency hedged ETF and a bullish foreign currency bet with an EAFE or Europe ETF.

With a similar through identical geographic lineup to the MSCI EAFE Index, DHDG can be used as a complement to or replacement for traditional EAFE strategies. The U.K. and Switzerland combine for 31 percent of DHDG's geographic lineup while the Netherlands and Japan combine for another 21.4 percent.

Although DHDG's largest sector weight is 20.3 percent to consumer discretionary, quality and dividends among EAFE stocks usually mean exposure to consumer staples, healthcare and industrial names. DHDG reflects that theme as those three groups combine for almost 55 percent of the new ETF's weight.