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With a strong U.S. market, many international investments have fallen out of favor. This is especially true in the dividend space, as the prospect of Fed tapering spooked investors earlier in the year, sending share prices in this space crashing.
However, while the Fed still looks to taper, international dividend picks have come back pretty strong as of late. These products have all bounced off their summer lows, and in many respects, are well-positioned to take advantage of current trends (3 Red Hot Dividend ETFs).
After all, even if the Fed starts to taper, the benchmark discount rate look to remain exceptionally low for quite some time, suggesting that income will still be at a premium. And with Europe and other key international markets also back on track, now could be a very interesting time to investigate the international dividend space further.
Given this, investors may want to consider making a play on some dividend ETFs with an international focus, assuming they have a high risk tolerance and can stomach some volatility. If you fit this bill, a look at any of these ETFs—all of which pay out at least 6% in 30-Day SEC terms—could be a good idea:
Global X Super Dividend (SDIV)
SDIV represents a compelling product to invest in international markets for high yield. SDIV is an equally weighted basket of 100 high yield stocks from around the world. With 30% exposure in U.S. equities, the fund also provides access to securities in Europe, Australia, Asia, Canada and Latin America.
Among sector allocations, real estate, financial services, utilities and telecommunication remain the top four choices for the fund. The fund charges a fee of 58 basis points annually.
The fund’s diversified focus has really worked well as these securities represent an alluring blend of higher returns and impressive yields. Furthermore, not only is the product well-mixed from a sector look, but it is well-diversified from an individual holding perspective as no single firm makes up more than 1.6% of assets (Real Estate ETFs--Real Winners in 2013?).
The 30-Day SEC yield comes in at 7.0%, representing a good opportunity for investors to generate some income by investing overseas. The fund has been flat over the past month, beating out the S&P 500 in the same time period.
SPDR S&P International Dividend ETF (DWX)
For global exposure in the ETF space, investors can invest in State Street’s DWX, which was launched in Feb 2008. The fund tracks the price and performance of the S&P International Dividend Opportunities Index, thereby giving investors an option to play dividend paying stocks on a global basis.
With asset under management of $1.4 billion, this fund provides exposure to the stocks globally that provide high dividend yields (4 Excellent Dividend ETFs for Income and Stability).
The fund has an attractive dividend yield of 6.5% in 30 Day SEC terms, thereby providing a good level of current income to investors. DWX has an edge in expenses as it charges an expense ratio of 45 basis points, the lowest on the list.
DWX provides exposure to 125 high dividend yield international stocks while around 31.7% of which make up the top 10 holdings. Among individual holdings, Ferrovial, Belgacom, and UPM-Kymmene Oyj are the top three choices all of which have about 2% of the total assets.
Among sector holdings, it has been noted that dividend focused ETFs are generally inclined towards telecommunication, financials and utilities and DWX is not an exception. It collectively assigns 50.9% of its asset base to the three preferred sectors.
DWX has more than 70% correlation with the developed countries and 15% with the emerging countries. The fund has added about 0.9% in the past month, though it is still struggling on a YTD look.
Guggenheim S&P Global Dividend Opportunities Index ETF (LVL)
For another global fund with a high yield, investors also have Guggenheim’s LVL to consider. The product tracks the S&P Global Dividend Opportunities NR Index, a benchmark that consists of 100 stocks and ADRs that have at least $1 billion in market cap and are also high yielders.
The fund manages an asset base of $69.9 million which it invests in a holding of 103 securities. The fund has just 19.64% exposure in U.S. equities while the rest is divided mainly among European and Australian securities.
For sectors, telecom accounts for nearly one-fourth of the total, while financials and energy stocks round out the top three.
This product also charges 60 basis points a year in fees, but has slightly lower volume of about 49,000 shares a day. However, the yield on this product comes in at 6.5% in 30-Day SEC yield terms (Guide to 10 Great ETFs Yielding 7% or More).
International dividend stocks fell out of favor with investors earlier in the year, as many focused on the U.S. market, and low yield stocks. This trend pushed share prices down across the board in many international markets, leading an exodus away from international dividend payers.
However, recent trends in Europe and some better trading in the dividend world have been encouraging to the space, producing decent short-term gains. Given this, some might want to take a closer look at this space for investment, especially if the positive trends continue in this overlooked corner of the market.
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