Advisors and investors know international stocks have been a source of frustration for some time. However, dividends have provided some buffer against those woes. Advisors and investors also know there are plenty of payout-themed international equity ETFs on the market today.
But it’s important to remember that many of these funds employ different methodologies. And that implyies varying outcomes for end users. On that note, the ALPS International Sector Dividend Dogs ETF (IDOG ) is one member of this group to consider.
IDOG, which follows the S-Network International Sector Dividend Dogs Index, holds the five highest-yielding stocks from 10 sectors and then equally weights those holdings. That methodology has delivered material benefits to IDOG investors because, over the past three years, the ALPS ETF has not only more than doubled the returns offered by the MSCI EAFE Index, the fund also soundly beat three competing products from some of the largest ETF sponsors. As one example during that period, IDOG more than quadrupled the returns of the competing Schwab ETF.
Other Dividend Dogs ETF Perks
Good returns are nice, but it’s always better when those returns win on a risk-adjusted basis. To its credit, IDOG’s annualized volatility was below that of the MSCI EAFE Index and the Dow Jones International Dividend Index over the past three years.
Obviously, those positive attributes refer to a complete time frame, but IDOG doesn’t lack for near-term advantages. For example, the ETF’s weight to Japanese stocks is just 8.26%, which is pertinent at a time when some market observers believe the high-flying Nikkei is due for a cooling-off period.
The case for Japanese stocks is largely dependent on an accommodative central bank, low valuations, and expectations that global investors will step back to Japanese sovereign debt. If any or all of those scenarios go the wrong way, stocks could be vulnerable. But IDOG’s geographic diversification provides some buffer against that threat.
Overall, IDOG provides exposure to stocks hailing from 18 countries, 13 of which are European nations. That indicates the ETF offers investors an avenue for wagering on a renaissance by that asset class without having to be dedicated to it. IDOG’s Europe exposure is meaningful for another reason. Outside of the U.S., it’s one of the most dependable payout growth regions in the world.
Banks are expected to be big contributors to European dividend growth this year, which is relevant in discussing IDOG. That’s because the ETF allocates 10.18% of its roster to financial services equities.
VettaFi LLC (“VettaFi”) is the index provider for IDOG, for which it receives an index licensing fee. However, IDOG is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of IDOG.
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