Many international markets are delivering equity performances outpacing those offered by the U.S. And in more good news for investors, dividend stocks are contributing to that trend.
Have a look at the ALPS International Sector Dividend Dogs ETF (IDOG ). That fund entered Monday with a year-to-date gain of nearly 13%. The $301 million IDOG, which turns 12 years old in June, tracks the S-Network International Sector Dividend Dogs Index. Multiple factors highlight the allure of IDOG as an avenue for tapping long-overlooked ex-U.S. equities.
For example, the ALPS ETF sports a trailing 12-month dividend yield of 4.32%. That’s more than triple what’s found on the S&P 500. Second, IDOG’s impressive start to 2025 is being built without the assistance of high-flying though riskier international equities, such as China growth stocks. In fact, IDOG’s entire roster comprises developed markets. And those stocks have long been considered undervalued.
IDOG: Intelligent Bet?
But don’t become overly enthusiastic about IDOG’s start to 2025 simply because the first quarter hasn’t elapsed yet. Still, it’s difficult to ignore this ETF. And others like it have some tailwinds that could prove durable over the course of this year.
First, the tech-heavy nature of domestic equity indexes is now proving to be a drag on U.S. stocks. For years, investors who accessed broader international ETFs were left disappointed because Europe – a major geographic component in those funds – is notoriously light on tech stocks. Now, the cyclical value tendencies of ETFs such as IDOG is becoming a desirable trait. That includes IDOG’s 11.51% weight to financial services stocks.
“Financial services, however, is a big slice of the universe for stocks outside the US, and also an overweight exposure for both international dividend indexes. The sector has been a strong performer lately—in many markets,” noted Morningstar’s Dan Lefkovitz. “In Europe, for example, financial services can claim to be the best performer for the past three years, as higher interest rates increased net interest margins for banks. Japanese, Canadian, and Australian banks, as well as insurers like Allianz ALV and AXA AXA, have also contributed to dividend index outperformance.”
Right for the Times?
IDOG doesn’t hold Canada stocks, but it is heavy on European fare. Japan and Australia combine for 20% of the fund’s geographic exposure. Additionally, the current market climate could be signaling that ETFs such as IDOG are right for the times.
“Risk-aware equity income investors can take heart in the relative performance of international dividend stocks in recent years. Their success demonstrates that a change in market dynamics could make equity-income investing more successful in the US,” concluded Lefkovitz.
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VettaFi is owned by VettaFi LLC (“VettaFi”). 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.
