A dividend ETF can be an ideal alternative for investors looking to extract that extra slice of yield, especially in the current market.
International dividend ETFs work much like their domestic high-dividend counterparts. The primary discerning feature is that they simply invest in international companies instead of those domiciled in the U.S.
Non-U.S. equities compose nearly 40% of global equity market capitalization when looking at the MSCI ACWI Index, as of November 2021, and while the U.S. is the largest source of dividends, it only represents about half of the global dividend pool, according to MSCI.
International developed stocks have traditionally yielded more than domestic stocks for years. This dynamic still holds true today, albeit with a lower absolute yield level, according to ProShares.
A fund like the SmartETFs Asia Pacific Dividend Builder ETF (ADIV) offers global exposure to high quality dividends. The fund invests in equities of companies domiciled in China, Taiwan, Hong Kong, Australia, Singapore, the U.S., South Korea, Thailand, Malaysia, and India, according to ETF Database.
ADIV has earned the Morningstar Quantitative Rating of Gold due to strengths including its sizable cost advantage of competitors, the management team’s considerable industry experience, and high quality exposure.
This strategy tends to hold smaller, more value-oriented companies compared with its average peers in the Pacific/Asia ex-Japan Stock Morningstar Category, according to Morningstar.
Analyzing additional factors, this strategy has consistently low exposure to momentum stocks. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so and those that have recently underperformed will keep lagging, according to Morningstar.
The strategy also has a position favoring high-quality stocks, which could contribute to higher downside risk protection. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets, according to Morningstar.
Additionally, the portfolio managers have shown an underweight risk tilt, demonstrated by low volatility exposure. These low-risk stocks are typically at their best when markets are not – making now a great time to add ADIV exposure to a portfolio.
For more news, information, and strategy, visit the Dividend Channel.
