Three Ex-U.S. Developed Market ETFs With Treasury-Topping Yields
The yield on the 10-year Treasury has retreated to 2.75 percent Tuesday and has declined 3.4 percent over the past five trading sessions.
That still is not much to cheer about because 10-year yields have still jumped about 7.5 percent, including today's loss, in just the past month.
Even at 2.75 percent, 10-year Treasuries now sport yields well in excess of some of the most beloved dividend ETFs. If 10-year yields hit three percent or higher, as some bond market observers believe will happen, the number of dividend ETFs with higher yields than U.S. government bonds will be further reduced.
Income investors looking for Treasury-topping yields have options, particularly developed market equity ETFs that exclude U.S.-based companies. Consider the following ETFs that currently have yields that are comfortably ahead of 10-year Treasuries.
WisdomTree International LargeCap Dividend Fund (NYSE: DOL)
The WisdomTree International LargeCap Dividend Fund has lagged some of the widely known U.S. dividend ETFs on a year-to-date basis, but over the past 30- and 90-day time frames, the fund has outperformed U.S.-focused rivals such as the SPDR S&P Dividend ETF (NYSE: SDY).
DOL's country exposure is similar to what investors will find in popular EAFE funds (Europe, Australia, Asia and the Far East) as the U.K., France and Australia combine for roughly 47 percent of the fund's weight. Exposure to the U.K. in a dividend ETF is not such a bad thing because that country is a developed market dividend leader after the U.S.
DOL celebrated its seventh birthday in June and has $234.6 million in assets under management, a 0.48 percent expense ratio and a 30-day SEC yield of 4.32 percent or 157 basis points ahead of 10-year Treasuries.
FlexShares Morningstar Developed Markets ex-US Factor Tilt Index ETF (NYSE: TLTD)
FlexShares has a suite of three "factor tilt" ETFs with TLTD being the developed markets, U.S. play. For the advisor or investor looking for an alternative to market-cap weighting in a developed markets ETF, TLTD is worthy of consideration.
Though not a hedged currency ETF, TLTD does offer ample exposure to continued bullishness in Japanese stocks as the world's third-largest economy accounts for 20.4 percent of the fund's weight. The U.K. and Canada combine for 29.4 percent of TLTD's weight as well.
While TLTD is heavily concentrated at the sector level with financials, industrials and discretionary names combining for 53 percent of the ETF's weight, the fund does offer exposure to small, mid and large caps as well as growth and value names.
Less than a year old, TLTD already has $195.5 million in assets under management. The 30-day SEC yield of 3.57 percent beats 10-year Treasuries by 82 basis points.
First Trust STOXX European Select Dividend Index Fund (NYSE: FDD)
For the investor looking for pure Europe exposure while being compensated for the perceived risk, the First Trust STOXX European Select Dividend Index Fund is worth a look. The U.K. and Switzerland combine for over 48 percent of FDD's weight, but after that, the ETF is heavy on eurozone economies.
Not only that, but FDD also allows investors to play a recovery in eurozone banks without betting directly on a sector-specific fund. Financials account for nearly 34 percent of the ETF's weight.
Some investors will make the mistake of focusing on FDD's size of just $52.8 million in AUM, but what should be focused on is the ability of this ETF to generate returns in the event of an ongoing Europe recovery and the 6.37 percent 30-day SEC yield.
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Disclosure: Author is long FDD.
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