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Per an article published on Wall Street Journal, U.S. stocks appear pricey relative to their international counterparts. Even though it has declined 16% to start 2022, the S&P 500 trades at 16.8 times its projected earnings over the next 12 months, according to FactSet, as quoted on Wall Street Journal, which is still above the average multiple of 15.7 over the past 20 years, but down from the peak of 24.1 in September 2020.
By comparison, Hong Kong’s Hang Seng trades at 9.5 times its projected earnings, Japan’s Nikkei 225 trades at 14.3 times earnings and Germany’s DAX trades at 11.4 times, per the WSJ article. Only the benchmarks in Belgium, Portugal and Saudi Arabia, as well as the tech-heavy Nasdaq Composite, have higher valuations based on future earnings than the S&P 500, according to data available on FactSet.
While China investing is tricky at the current level due to a spike in COVID cases and the resultant lockdowns, supply-chain issues, slowing growth, high inflation and high debt levels, Japan investing looks appealing. The U.S. dollar index rose to fresh two-decade highs against the yen. This is a plus for Japan investing as most stocks in the Nikkei are export-intensive and fare better in a falling yen environment.
Morgan Stanley strategists are also overweight on the FTSE 100, as quoted on a Bloomberg article. Notably, the FTSE 100 represents more than 80% of the London Stock Exchange's market capitalization.
Against this backdrop, below, we highlight a few international ETFs that have breezed past the S&P 500 this year and may continue to do so in the near term. Most of the winning ETFs are high-dividend in nature.
ETFs in Focus
iShares Currency Hedged MSCI United Kingdom ETF – Up 2.6% YTD
The underlying MSCI United Kingdom 100% Hedged to USD Index consists of stocks traded primarily on the London Stock Exchange, with the currency risk of the securities included in the Underlying Index hedged to the U.S. dollar on a monthly basis. The fund yields 4.10% annually and charges 50 bps in fees.
Legg Mason International Low Volatility High Dividend ETF (LVHI - Free Report) – Up 0.41% YTD against a 15.6% decline in the S&P 500
The underlying QS International Low Volatility High Dividend Hedged Index is composed of equity securities of developed markets outside the United States with relatively high yield and low price and earnings volatility while mitigating exposure to fluctuations between the values of the U.S. dollar and other international currencies. The fund charges 40 bps and yields 3.50% annually.
WisdomTree Japan Hedged Equity Fund (DXJ - Free Report) – Down 1.1% YTD
The underlying WisdomTree Japan Hedged Equity Index is designed to provide exposure to Japanese equity markets while at the same time neutralizing exposure to fluctuations of the Japanese Yen movements relative to the U.S. dollar. The fund charges 48 bps in fees and yields 2.61% annually.
Invesco International Dividend Achievers ETF (PID - Free Report) – Down 3.4% YTD
The underlying NASDAQ International Dividend Achievers Index identifies an international group of ADR, GDR and non-US ordinary stocks that have qualified as International Dividend Achievers. These companies have increased their aggregate annual regular cash dividend payments consistently for at least each of the last five consecutive years. The fund charges 56 bps in fees and yields 3.44% annually.
VictoryShares International High Dividend Volatility Weighted ETF (CID - Free Report) – Down 3.8% YTD
The underlying Nasdaq Victory International High Dividend 100 Volatility Weighted Index begins with the highest 100 dividend-yielding stocks within the Nasdaq Victory International 500 Volatility Weighted Index. The fund charges 45 bps in fees and yields 5.28% annually.
Franklin LibertyQ International Equity Hedged ETF – Down 5.4% YTD
The underlying LibertyQ International Equity Hedged Index includes stocks from developed market countries in Europe, Australasia and the Far East that have favorable exposure to multiple investment style factors. The fund charges 40 bps in fees and yields 2.87% annually.
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Are International ETFs Cheaper Than U.S. ETFs?
Per an article published on Wall Street Journal, U.S. stocks appear pricey relative to their international counterparts. Even though it has declined 16% to start 2022, the S&P 500 trades at 16.8 times its projected earnings over the next 12 months, according to FactSet, as quoted on Wall Street Journal, which is still above the average multiple of 15.7 over the past 20 years, but down from the peak of 24.1 in September 2020.
By comparison, Hong Kong’s Hang Seng trades at 9.5 times its projected earnings, Japan’s Nikkei 225 trades at 14.3 times earnings and Germany’s DAX trades at 11.4 times, per the WSJ article. Only the benchmarks in Belgium, Portugal and Saudi Arabia, as well as the tech-heavy Nasdaq Composite, have higher valuations based on future earnings than the S&P 500, according to data available on FactSet.
While China investing is tricky at the current level due to a spike in COVID cases and the resultant lockdowns, supply-chain issues, slowing growth, high inflation and high debt levels, Japan investing looks appealing. The U.S. dollar index rose to fresh two-decade highs against the yen. This is a plus for Japan investing as most stocks in the Nikkei are export-intensive and fare better in a falling yen environment.
Morgan Stanley strategists are also overweight on the FTSE 100, as quoted on a Bloomberg article. Notably, the FTSE 100 represents more than 80% of the London Stock Exchange's market capitalization.
Against this backdrop, below, we highlight a few international ETFs that have breezed past the S&P 500 this year and may continue to do so in the near term. Most of the winning ETFs are high-dividend in nature.
ETFs in Focus
iShares Currency Hedged MSCI United Kingdom ETF – Up 2.6% YTD
The underlying MSCI United Kingdom 100% Hedged to USD Index consists of stocks traded primarily on the London Stock Exchange, with the currency risk of the securities included in the Underlying Index hedged to the U.S. dollar on a monthly basis. The fund yields 4.10% annually and charges 50 bps in fees.
Legg Mason International Low Volatility High Dividend ETF (LVHI - Free Report) – Up 0.41% YTD against a 15.6% decline in the S&P 500
The underlying QS International Low Volatility High Dividend Hedged Index is composed of equity securities of developed markets outside the United States with relatively high yield and low price and earnings volatility while mitigating exposure to fluctuations between the values of the U.S. dollar and other international currencies. The fund charges 40 bps and yields 3.50% annually.
WisdomTree Japan Hedged Equity Fund (DXJ - Free Report) – Down 1.1% YTD
The underlying WisdomTree Japan Hedged Equity Index is designed to provide exposure to Japanese equity markets while at the same time neutralizing exposure to fluctuations of the Japanese Yen movements relative to the U.S. dollar. The fund charges 48 bps in fees and yields 2.61% annually.
Invesco International Dividend Achievers ETF (PID - Free Report) – Down 3.4% YTD
The underlying NASDAQ International Dividend Achievers Index identifies an international group of ADR, GDR and non-US ordinary stocks that have qualified as International Dividend Achievers. These companies have increased their aggregate annual regular cash dividend payments consistently for at least each of the last five consecutive years. The fund charges 56 bps in fees and yields 3.44% annually.
VictoryShares International High Dividend Volatility Weighted ETF (CID - Free Report) – Down 3.8% YTD
The underlying Nasdaq Victory International High Dividend 100 Volatility Weighted Index begins with the highest 100 dividend-yielding stocks within the Nasdaq Victory International 500 Volatility Weighted Index. The fund charges 45 bps in fees and yields 5.28% annually.
Franklin LibertyQ International Equity Hedged ETF – Down 5.4% YTD
The underlying LibertyQ International Equity Hedged Index includes stocks from developed market countries in Europe, Australasia and the Far East that have favorable exposure to multiple investment style factors. The fund charges 40 bps in fees and yields 2.87% annually.