Checking In: Do The DEW
Amidst yet another Europe-induced market calamity, investors are once again embracing the boring-is-beautiful propensities of dividend stocks. Think about it: How many times over the past couple of weeks have you heard someone extol the virtues of dividend stocks and ETFs? A lot.
The fact that dividends never really go out of style notwithstanding, investors face a vexing dividend dilemma due to the current state of affairs in the global financial markets: International dividend stocks often offer stronger payouts and higher yields than their U.S. counterparts, but is now the time to be thinking globally when it comes to dividends?
There are plenty of dividend ETFs that can help solve that quagmire, particularly for patient investors. One of those dividend funds that looks like it will require a little patience, but still offers potential to reward income investors down the road is the WisdomTree Global Equity Income Fund (NYSE: DEW).
The WisdomTree Global Equity Income Fund comes from a long line of solid WisdomTree global dividend ETFs. DEW, which made its debut in June 2006, is now home to almost $88 million in assets under management and an expense ratio of 0.58%.
Yet despite the combination of trailing 12-month yield of 4.53% and international exposure, DEW is still somewhat anonymous in the dividend ETF realm with average daily volume that is barely above 10,000 shares.
An interesting element about DEW is its country composition. The fund offers exposure to 39 countries ranging from a slight 0.02% weight to Argentina to a 20.2% allocation to the U.S. Yes, the U.S. is DEW's largest country weight and that is a factor that might assuage those investors that are skittish about dancing with foreign stocks. The U.K. and Australia combine for another 23.4% of DEW's weight.
Overall, DEW offers exposure to 17 markets that are either considered emerging or frontier. On the downside, nine Euro Zone countries led by France (6.5%) and Germany (4%) dot DEW's lineup. The Euro Zone exposure might explain why DEW is up just 2.8% year-to-date, a performance that lags the U.S.-focused SPDR S&P Dividend ETF (NYSE: SDY) and the Vanguard Dividend Appreciation ETF (NYSE: VIG).
DEW is home to nearly 570 stocks and AT&T (NYSE: T) leads the way with a weight of 2.18%. Other familiar names among the ETF's top-10 holdings include Nestle (PK: NSRGY), Pfizer (NYSE: PFE) and Total (NYSE: TOT).
While financials account for almost 25% of DEW's sector allocation, the fund is also heavy on low-beta sectors as telecom, health care, utilities and staples names combine for over 53% of DEW's overall weight.
There are a couple of things that are important to remember regarding DEW. First, the near-term technical outlook is unattractive. Following a recent violation of support at $41, the ETF looks poised to challenge its 200-day moving average. If that doesn't hold as support, the selling pressure will likely intensify.
Second, that's not the worst news in the world because it allows for patience to be a virtue as investors will be able to gain better pricing.
Third, and perhaps most importantly of all, there are the matters of valuation and yield. Global dividend stocks are viewed as cheaper than their U.S. peers, particularly Asian and European issues.
Regarding yield, the SPDR Dow Jones Industrial Average (NYSE: DIA) currently yields just 2.4% while the SPDR S&P 500 (NYSE: SPY) yields a piddly 1.93%. On the other hand, many global markets offer yields of 3% to 5%, including Germany, the Netherlands, Hong Kong, Brazil, Australia, Norway, Singapore and New Zealand, according to Russ Koesterich of iShares. Those markets represent about a quarter of DEW's weight.
Doing the DEW probably doesn't make sense right this moment, but with U.S. Treasuries and the S&P 500 offering yields that are hardly worth getting out of bed for, DEW deserves consideration as a buy-on-the-dip candidate.
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