Confirming the resurgence of international stocks, the widely followed MSCI EAFE Index trounced the S&P 500 last year, depressing the dividend yield on the foreign equity benchmark in the process. Rest assured equity income investors. You’re not left out in the cold when it comes to international rebound.
One way of getting in on that rally while accessing sturdy payouts is with the ALPS O’Shares International Developed Quality Dividend ETF (OEFA). OEFA, which follows the O’Shares International Developed Quality Dividend Index, is off to a solid this year. It’s higher by 3%, extending the bullishness that materialized last year.
As a dividend-powered alternative to old guard MSCI EAFE-tracking ETFs, OEFA provides comparable geographic exposures to those legacy products. This includes a sizable weight to Europe – usually the largest regional allocation by far in basic EAFE products. From a dividend growth perspective, OEFA’s Europe exposure is meaningful because payouts there are growing.
Europe Delivers Dividend Growth
OEFA sports a trailing 12-month yield of 1.95%. That’s not eye-catching, but it implies ample room for payout growth. This is pertinent when considering the ETF is structured as a quality dividend growth fund. Europe is an important part of that equation.
“The largest European companies increased their dividends by an average of 6.2% last year,” noted Morningstar’s Fernando Luque. “The sectors that achieved the highest returns last year in the European market were financial services and utilities. They also had the greatest relative weight in the dividend index compared to the broader index.”
OEFA allocates more than 14% of its portfolio to financial services and utilities stocks. The ETF’s nearly 15% weight to French stocks is also worth highlighting because the Eurozone’s second-largest economy is proving to be a credible dividend growth destination.
The ALPS ETF is also something of an addition by subtraction proposition. Said another way, OEFA investors benefit from what’s not included in the fund, also known as dividend offenders. As one example, OEFA allocates 8.10% of its roster to German stocks, but fortunately that doesn’t include that country’s cadre of well-known automobile manufacturers, some of which cut payouts last year.
“Leading German car manufacturers have also reduced their payouts to shareholders,” added Luque. “The fall in profits suffered by these companies due to factors such as the slowdown in key markets, especially China, tariffs, and high electrification costs has put pressure on their ability to distribute dividends. Volkswagen VOW3 reduced its dividend from EUR 9.06 in 2024 to EUR 6.36 in 2025. BMW BMW also cut its dividend from EUR 6.00 in 2024 to EUR 4.30 in 2025, but the company is engaged in a major share buyback program.”
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