Europe hasn’t been a hot topic, at least in a positive way, in investment conversations for some time, but that is starting to change and that shift brings opportunities with ETFs, including the WisdomTree Europe Quality Dividend Growth Fund (EUDG ).
EUDG tracks the WisdomTree Europe Dividend Growth Index, “a fundamentally weighted index that measures the performance of dividend-paying common stocks with growth characteristics selected from the WisdomTree DEFA Index,” according to WisdomTree.
European equities are showing noticeable signs of life, but some investors remain skittish of across the pond offerings. After years of disappointing returns, that outlook is understandable, but investors can participate in some of the upside with quality via EUDG. Bolstering the case for EUDG is that teamwork is emerging to prop up European economies.
“For years, the European Central Bank (ECB) has done everything it could to help stimulate growth on its own. Now, finally, the frugal northern countries and more fragile southern countries have aligned to provide a powerful joint monetary and fiscal stimulus package,” writes WisdomTree associate director of asset allocation Joseph Tenaglia in a recent note.
The effective monetary policy response in the face of the coronavirus pandemic is propping up European equities this year.
In Europe, rising earnings growth could bolster dividend growth in 2020. Investors should consider quality dividend growth stocks that typically exhibit stable earnings, solid fundamentals, strong histories of profit and growth, commitment to shareholders, and management team convection in their businesses.
“Economic surprises are jumping as well. EU GDP growth is expected to surpass that of the U.S. in 2021, a feat that has only happened eight times since 1992,” writes Tenaglia. “The euro is rising on relative growth expectations differentials, and net long euro positioning just hit an all-time high.”
EUDG’s components are weighed by paid dividends, explaining the fund’s emphasis on return on assets and return on equity ensures ample exposure to health care, consumer discretionary, and industrial names.
Importantly, EUDG is capturing plenty of upside as European stocks rebound.
“High-quality stocks in Europe have captured 91% of the market’s rally—a respectable number on its own and more than 500 bps better than the lowest quality quintile,” writes Tenaglia. “EUDG has experienced the best of all worlds— mitigating downside losses when the market sold off, while also participating in more than 100% of the rebound since March.”