Dividend investing is among the investment themes that are always hot. However, with the Wall Street staging a tremendous rally this year, stocks and ETFs with high beta, growth and momentum scooped up solid gains, leaving value products like dividend ETFs a little loser.
The U.S. dividend fund
iShares Select Dividend ETF , which tracks the Dow Jones U.S. Select Dividend Index and yields 3.01% annually is up 10.7% against 24.6% returns offered by DVY SPDR Dow Jones Industrial Average ETF DIA. Notably, DIA has yielded only 1.97% annually (as of Dec 26, 2017).
Risk-on sentiments prevailed in the market with rebounding global growth, a moderately hawkish Fed and the most important factor – Trump Trade. His promises of deregulation and fiscal reflation offered a boost to Wall Street, barring some occasional dips on policy uncertainty. In fact, the year saw the passing of the GOP-promised tax reform (or cuts) after a lot of negotiation.
Things shaped up even on the earnings front. As per the
Earnings Trends issued on Dec 19, year-over-year corporate earnings growth by the S&P 500 companies was 7.5% over 5% revenue growth. As far as Q4 earnings are concerned, 8.6% growth was witnessed over 6.8% revenue expansion, which is decent enough in the current scenario.
Economic growth globally was on an uptrend. Bond yields remained low even after three Fed rate hikes. All these propelled growth and momentum investing. As a result, U.S. dividend ETFs have fallen behind this year (read:
Top Large-Cap Growth ETFs of 2017).
Even then, there are some international ETFs that have gained more than 15% in 2017 and yield close to 3%. Below we highlight those gems.
SPDR S&P Emerging Markets Dividend ETF EDIV – Up 20.6%
The fund includes exchange-listed common stocks from emerging market countries that offer high dividend yields. Moreover, stocks need to have positive three-year earnings growth and profitability. Stocks are chosen on the basis of annual dividend yield. The fund yields 3.03% annually (as of Dec 27, 2017) (read:
5 Trending Dividend-Yield Weighted ETFs). ALPS International Sector Dividend Dogs ETF IDOG – Up 19.9%
The underlying index of the fund – the S-Network International Sector Dividend Dogs Index – recognizes five high yielding securities,on the basis of regular cash dividends, in each of the 10 Global Industry Classification Standard sectors and is rebalanced quarterly. The fund yields 3.35% annually.
WisdomTree Asia Pacific Ex-Japan Fund AXJL – Up 19.5%
The fund looks to track the WisdomTree Asia Pacific ex-Japan Index. The index is fundamentally-weighted and measures the performance of dividend paying companies in the Asia Pacific ex-Japan region. The fund yields about 3.21% annually.
WisdomTree Emerging Markets High Dividend Fund ( DEM Quick Quote DEM - Free Report) – Up 18.1%
The underlying index is a fundamentally weighted and measures the performance of the highest dividend yielding stocks selected on the basis of market capitalization and liquidity. Companies are weighted in the index on the yearly cash dividend paid. The fund yields 3.68% annually (read:
EM ETFs: What You Need to Know Before Investing). iShares Emerging Markets Dividend ETF DVYE – Up 17.7%
The underlying index of the fund measures the performance of the companies in emerging market countries that have given relatively high dividend yields consistently, over time. The fund yields 4.97% annually.
FlexShares International Quality Dividend Dynamic Index Fund IQDY – Up 17.2%
The underlying index provides exposure to a high-quality income-oriented portfolio of long-only international securities issued by non-U.S.-based companies, with an emphasis on long-term capital growth and a targeted overall beta that is generally between 1.0 to 1.5 times that of the Northern Trust International Large Cap Index. It yields 3.64% annually.
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