Dividend ETFs: Going Beyond The United States

by on September 5, 2012 | Updated September 24, 2012 | ETFs Mentioned:

Even with recent talks by the Fed calling for another round of stimulus for the U.S. economy, domestic investors are looking for a place to invest outside of the United States in the hopes of achieving more lucrative returns. These same investors may wish to consider adding dividend-paying stocks to their foreign assets, as this asset class holds major appeal in the current low-rate environment. Thanks to the evolution of the ETF industry, investors can now easily beef up their portfolio’s current income while at the same time improving overall geographic diversification. As such, below we outline 20 ETFs with little or no exposure to the United States that target dividend-paying companies [see also Monthly Dividend ETFdb Portfolio]:

Emerging Markets Dividend ETFs

Many investors focus on dividend-paying emerging markets stocks as an opportunity to lower the overall volatility of an asset class with significant potential for long-term capital appreciation. There are currently a handful of ETFs offering exposure to dividend-paying stocks in emerging markets [see also ETF Country Exposure Tool]:

  • WisdomTree Emerging Markets Equity Income Fund (DEM): This ETF is linked to a fundamentally weighted index that includes the highest dividend yielding stocks from emerging markets. The underlying Emerging Markets Equity Income Index currently has a dividend yield of about 6%, and it is allocated primarily towards banks, energy stocks, materials companies and telecoms.
  • Emerging Market SmallCap Fund (DGS): Another WisdomTree fund, this one also follows a fundamentally weighted index, but only includes the best performing small-cap stocks in emerging markets. The fund currently has an annual dividend yield of 3.25%, and the majority of its holdings are spread across both developed and emerging Asia , with some minor holdings in Latin America and Africa [see also Comparing Four Dividend ETFs].
  • SPDR S&P Emerging Markets Dividend ETF (EDIV): Much like DEM, this fund tracks the highest dividend-yielding stocks in emerging markets, but instead tracks the S&P Emerging Markets Dividend Opportunities Index. Most of the holdings are based in Taiwan, China and Brazil with a current annual dividend yield of 5.2%.
  • Emerging Markets Dividend Index Fund (DVYE): This ETF is linked to the Dow Jones Emerging Markets Dividend Index, which measures the performance of 100 leading dividend-yielding companies located in emerging markets. The dividend yield for this index is currently about 5.13%, and it is allocated primarily towards industrials, telecom, financials  and consumer goods.
  • Low Volatility Emerging Markets Dividend ETF (HILO): Unlike most of the funds listed in this category this ETF focuses on not just high dividend yields but low volatility and consistency over time. Of the companies included a majority are communications services, utilities and consumer cyclicals with about half of them based in emerging Asian countries [see also Dividend ETF Investing: Four Critical Factors To Consider].

Europe Dividend ETF

With Europe not being the most stable place at the moment, dividend-paying stocks are a great way to get European exposure with less risk. Below are the funds that only invest in European dividend-paying stocks:

  • International LargeCap Dividend Fund (DOL): While it might not have been the intention of this large-cap dividend fund, 70% of its holdings are based out of Europe, some of the top countries include the United Kingdom, France and Switzerland. This ETF tracks the WisdomTree International LargeCap Dividend Index, which has a current dividend yield of 4.6%
  • DEFA High-Yielding Equity Fund Holdings (DTH): This ETF is linked to a fundamentally weighted index that includes companies with market caps of at least $200 million. The underlying Wisdom DEFA Equity Income Index has a current dividend yield of about 6% and is allocated primarily towards banks, telecom, energy and pharmaceuticals.
  • Europe SmallCap Dividend Fund Holdings (DFE): The index this ETF follows is composed of the bottom 25% of the market caps of the WisdomTree Europe Dividend Index and is weighted based on annual cash dividends paid. The current dividend yield is 4% with about half of the holdings are made up of industrials and consumer cyclicals.
  • STOXX European Select Dividend Index Fund (FDD): This fund follows a dividend weighted index of 30 European stocks with the highest yields. This ETF  has a current annual dividend yield of 6% with the majority country holding being the United Kingdom by a long run as well as France and Germany [see also How To Find The Right Dividend ETF].

Pacific Dividend ETFs

Many investors focus on the Pacific region as a way to get specialized exposure to growing and well-established markets that pay attractive dividends. There are currently a number of ETFs offering exposure exclusively to this corner of the world:

  • Japan SmallCap Fund (DFJ): This fund is made up entirely of small and mid-cap dividend paying companies based in Japan, chosen from the WisdomTree Japan Dividend Index. This ETF  has a current annual dividend yield of about 2.3% and is allocated primarily towards industrials, consumer cyclical, technology and basic materials.
  • Asia Pacific ex-Japan Fund (AXJL): This product from WisdomTree is based on an index comprised of the 300 largest dividend paying companies in all the Asian countries, excluding Japan. The underlying Asia Pacific ex-Japan Index currently has about a 4.5% dividend yield is most heavily invested in Australia, Hong Kong and Taiwan [see also Ex-Japan ETFs In Focus].
  • Australia Dividend Fund (AUSE): This ETF tracks a fundamentally weighted index that only invests in the 10 largest dividend paying companies based in Australia. The funds annual dividend yield is around 5% and is primarily invested in financial services, consumer cyclical and consumer defensive companies.
  • Asia/Pacific Dividend 30 Index Fund (DVYA): The underlying index, Dow Jones Asia/Pacific Select Dividend 30, measures the performance of the top 30 dividend-paying countries by dividend yield in the Pacific region. Half of the fund’s holdings are based out of Australia with Singapore, Hong Kong and China being the minority holders  [see also Ultimate Guide To Dividend ETF Investing].

Global ex-U.S. Dividend ETFs

There are consistent dividends and high yields in every country, why would you ever limit yourself to just one kind of market? For investors looking for a mix of emerging and developed markets to gain more global exposure, the following funds are worth investigating:

  • SPDR S&P International Dividend ETF (DWX): This ETF tracks an index that includes 100 high yielding common stocks from outside of the United States, with the majority based in the United Kingdom, Australia and Germany.  With an annual dividend yield of about 7%, this fund is primarily invested in communication stocks, utilities and consumer cyclicals [see also Euro-Free Europe ETFdb Portfolio].
  • Commodity Country Equity Fund (CCXE): The underlying index for this ETF is made up of dividend paying companies, ranked by market capitalization, from only eight commodity rich countries: New Zealand, Norway, Russia, Australia, Brazil, Chile, Canada and South Africa. With a current dividend yield of about 5%, the majority of the fund is invested in energy and banks.
  • ABC High Dividend ETF (ABCS): This ETF is comprised of only exchange listed ADRs from Brazil and Australia, as well as companies locally listed in Australia and Canada. ABCS currently has an annual dividend yield of 5.5% and the majority of its holdings are in utilities, energy and financial services.

Developed Markets ETFs

Developed markets offer more consistency and information than any other market sector and make for stable investments away from home. Investors who want to exclude the United States but still have developed market exposure should consider the the funds below:

  • Dow Jones EPAC Select Dividend (IDV): To be included in this ETF a company has to have had relatively high and consistent dividends over a period of time. Most of the companies included are giant and large caps based in Europe or Australia [see also Three High-Yielding Monthly Dividend ETFs].
  • DEFA Fund (DWM): The underlying index in this ETF is fundamentally weighted and measures the performances of companies that pay a dividend in developed markets outside of the United States and Canada. This ETF is fairly evenly invested in every area of the market aside from a major allocation to financials.
  • International Dividend ex-Financials Fund (DOO): This ETF is invested in any company that pays a dividend outside of the United States and is not a part of the financial sector. With an annual dividend yield of about 5%, this ETF is evenly invested across giant and large cap companies.
  • International MidCap Dividend Fund (DIM): This ETF is composed of mid-cap, dividend-paying companies that are part of the WisdomTree International MidCap Dividend Index. This index has a current dividend yield of about 5% and is most heavily invested in Japan, the United Kingdom and Australia  [see also 12 High-Yielding Monthly Distribution Bond ETFs].
  • Middle East Dividend ETF (GULF): This ETF is invested in companies out of the Middle East that pay regular and consistent dividends. Roughly two-thirds of the underlying basket of holdings is split between financials and communications with the heaviest investments in Qatar, Kuwait, and the United Arab Emirates.
  • International SmallCap Fund (DLS): This ETF includes companies that compose the bottom 25% of the market cap of the WisdomTree DEFA and also pay dividends. This index has a current dividend yield of about 6% and is most heavily invested in Japan, the United Kingdom, and Australia.

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Disclosure: No positions at time of writing.