Dividend stocks steadied late last year after a turbulent first half. With that steadiness comes expectations that growth will resume this year. Those sentiments apply to international dividend payers too, enhancing the appeal of the ALPS International Sector Dividend Dogs ETF (IDOG ).
ALPS identifies the five highest-yielding securities in the 10 GICS sectors on the last trading day of November. From there, IDOG is rebalanced quarterly in an effort to keep sector weights in the area of 10% and individual holdings at around 2%.
With more looking to foreign markets as a way to diversify away from U.S. equities, investors will face certain risks associated with international exposure. Nevertheless, there are a number of smart beta global exchange traded fund strategies that can help investors better manage risks.
“We expect the Brexit deal, the conclusion of US elections and the availability of the vaccine to reduce uncertainty and encourage more companies to resume payments or grow dividends in 2021,” writes IHS Markit.
How to Safely Capture the Global Markets
Most investors would typically turn to a traditional, beta index fund strategy to garner global market exposure. However, these market cap-weighted indexing methodologies may cause investors to become exposed to some of the largest companies that have grown the most or become too focused on only a handful of countries. For its part, IDOG offers a more bespoke approach to trimming international equity risk than its rival cap-weighted beta funds. IDOG also features a value tilt.
IDOG may help investors gain improved risk-adjusted returns to European markets by diminishing downside risk while still participating in upside potential. Furthermore, its dividend focus also helps investors focus on quality companies with a history of growing dividends. There are good reasons to consider IDOG over a traditional, broad developed markets ETF.
“IHS Markit expects dividends declared this year to approach $1.78 trillion, up about 7% from $1.67 trillion in 2020. In compiling the report, IHS Markit relied on dividend forecasts for more than 12,500 global firms, including the constituents of all the major equity indexes,” reports Lawrence Strauss for Barron’s.
Other international developed market dividend ETFs include the FlexShares International Quality Dividend Dynamic Index Fund (IQDY ), ProShares MSCI EAFE Dividend Growers ETF (EFAD ), and the SPDR S&P International Dividend ETF (DWX ).
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