New ETF Goes Global For Dividends

Going global in the search for dividends can be rewarding for income investors because some developed markets are home to stocks that sport far higher dividend yields than are found on U.S. equivalents.

Still, there are risks with purely international dividend strategies and the relevant exchange traded funds and it cannot be overlooked that the US is by far the largest dividend market in the world. The Pacer Global High Dividend ETF PGHD, which debuted Tuesday, helps dividend investors maintain ample to U.S. dividend payers while adding some international exposure to their portfolios.

The Pacer Global High Dividend ETF uses an approach that ensures the ETF holds stocks that can sustain and grow their payouts. PGHD applies a free cash flow screen to the FTSE All World Developed Large-Cap Index, which is home to about 1,000 companies. From there, the ETF's selection universe is trimmed to 300. From those companies, the 100 with the highest trailing 12-month dividend yields are selected.

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In addition to a 35.5 percent weight to U.S. stocks, the new ETF is home to stocks from some of the more dependable developed market dividend destinations. For example, Switzerland, the UK and Australia combine for over 22 percent of PGHD's weight, according to issuer data.

PGHD's top 10 holdings combine for just 21.3 percent of the ETF's weight. That group includes familiar U.S. dividend such as Dow component Wal-Mart Stores, Inc. WMT, Altria Group Inc MO and AT&T Inc. T. Five of the ETF's top 10 holdings are U.S.-based companies.

“Companies with a high free cash flow yield and a high dividend yield have historically declined less in market downturns,” according to Pacer. “Investing in high free cash flow producing companies can provide growth opportunities necessary to produce capital appreciation for investors in addition to the income received.”

PGHD is the sixth Pacer product to list on Bats.

“Bats ranks as the top exchange operator for ETF trading with the Bats Exchanges – BYX, BZX, EGDA, EDGX – executing 26.9% of all ETF trading in January. Bats was the #1 U.S. market for ETF trading for every month of 2015 and the #2 U.S. market for overall equities trading,” according to a statement issued by the exchange operator.

PGHD charges 0.6 percent per year, or $60 per $10,000 invested.