With interest rates in the U.S. and other primary developed economies still at relatively low levels, many investors looking to diversify their portfolios internationally seek the added benefit of higher dividend yields available abroad. There are a number of exchange-traded funds (ETFs) available in the category of international equity funds that offer dividend yields in excess of 5%.
Investors can choose from broad-exposure international ETFs to more geographically focused funds such as Asia-Pacific or Europe ETFs, and they can choose between funds that include or exclude U.S.-based equities. The following is an overview of five of the highest dividend-yielding international equity ETFs as of June 2020.
Key Takeaways
- Dividend-paying international stocks can be a solid way to diversify a portfolio while achieving dividend yields in excess of 5%.
- The iShares International Select Dividend ETF (IDV) is one of the largest ETFs in this category with $4.6 billion in assets under management and a 5.7% dividend yield.
- On the downside, the return of many of these ETFs has underperformed the U.S. market, as measured by the S&P 500.
Global X SuperDividend ETF
Global X launched the Global X SuperDividend ETF (SDIV) in 2011 to offer investors exposure to the highest-yielding global equities. This widely held ETF, with $574 million in total assets under management (AUM), aims to hold the highest-yield stocks available internationally, without regard to market sector or country.
The SDIV tracks the Solactive Global SuperDividend Index, which is composed of 100 equal-weighted, global high-dividend yield securities, selected based on yield and screened to meet liquidity and financial stability standards. The fund is ordinarily 80% or more invested in the equities contained in the underlying index, or in American Depositary Receipts (ADR) or Global Depositary Receipts (GDR) that represent those equities.
The top three countries represented in the portfolio are the U.S., Australia and the U.K. Financial sector stocks, including real estate, make up the bulk of the portfolio, accounting for almost 55% of the portfolio assets.
The fund's top holdings include Kumba Iron Ore (KIO SJ), B&G Foods (BGS) and Diversified Gas & Oil (DGOC LN). The expense ratio for this ETF is 0.59%. The five-year average annualized return is -8.67%, but it offers a hefty 8.46% dividend yield.
Invesco S&P Global Dividend Opportunities Index ETF
Guggenheim (now owned by Invesco) launched the Invesco S&P Global Dividend Opportunities Index ETF (LVL) in 2007, with the stated investment goal of offering both income and growth potential opportunity by investing in high-growth-potential global equities that have historically offered superior dividend yields.
The fund invests its $30 million in assets to track the S&P Global Dividend Opportunities Index, a yield-weighted index that is made up of the 100 highest dividend-yielding stocks contained in the S&P Global BMI index, which is designed to reflect the overall global stock markets performance, including both developed and emerging market economies.
U.S. equities account for 30.4% of the portfolio, followed by Canada at 15.4%, and Switzerland at 10.8%. Financial stocks dominate, making up 25.4% of portfolio assets. The top three holdings are Orange SA, Total SA, and Eni SpA,
The expense ratio is 0.64%, and the dividend yield is 3.41%. The five-year average annualized return for the fund is 5.87%. Meanwhile, the average annual return for the S&P 500 is 8.7%.
SPDR S&P International Dividend ETF
The SPDR S&P International Dividend ETF (DWX) was launched by State Street Global Advisors in 2008 and has attracted $594.89 million in assets under management (AUM) as of June 2020. This ETF tracks the S&P International Dividend Opportunities Index, an index composed of the top 100 highest dividend-yield stocks of companies headquartered outside the U.S. that meet minimum liquidity and financial stability standards.
Canada and Japan are the most heavily represented countries, making up 18.9% and 11.1% of the portfolio assets, respectively. Financials, utilities, and real estate stocks combine to provide more than half of the fund's holdings.
Top portfolio holdings are Enagas SA, Red Electrica Corp. SA, and Orange SA. The fund's expense ratio is 0.45%. The five-year average return is negative 2%. The dividend yield for the SPDR S&P International Dividend ETF is 4.19%.
iShares Asia/Pacific Dividend ETF
Investors seeking exposure to the important Asia-Pacific region may wish to consider BlackRock's iShares Asia/Pacific Dividend ETF (DVYA), which offers a dividend yield of 6.79%. The fund is relatively new, having been launched in 2012. It has $24.5 million in assets. This ETF tracks the dividend-weighted Dow Jones Asia/Pacific Select Dividend 30 Index, which is composed of just 30 equities that are selected based on high yield, growth potential, consistent performance, and sustainability. The fund is typically 90% or more invested in the securities that make up the index or in other investments with characteristics similar to securities contained in the index.
Australia accounts for 55.2% of the portfolio's assets. Hong Kong, Japan, and Singapore are also all substantially represented in the portfolio's holdings. Consumer discretionary and financials are the two most heavily represented market sectors, each accounting for a bit more than 25% of the total portfolio.
The top three holdings for this ETF are JB Hi-Fi LTD, CSR LTD, and Super Retail Group LTD. The fund's five-year average annualized return is negative 5.62%. The expense ratio is 0.49%.
iShares International Select Dividend ETF
BlackRock also offers the broader-based iShares International Select Dividend ETF (IDV), which it launched in 2007. This ETF has total assets of $3.3 billion, making it one of the 10 most widely held foreign large-cap equity ETFs. This fund, which offers a 6.1% dividend yield, tracks the Dow Jones EPAC Select Dividend Index, composed of 100 high-dividend yield stocks traded primarily on exchanges in non-U.S. developed markets.
The U.K. makes up 23.7% of the portfolio, followed by Australia at 16%, and Italy at 9%. Financial sector stocks garner the largest share of assets, accounting for 38.5% of the total portfolio. The top holdings in the portfolio are British America Tobacco (BATS), Commonwealth Bank of Australia (CBA) and Azimut Holding (AZM).
The expense ratio for the iShares International Select Dividend ETF is 0.49%. The fund's five-year average annualized return is negative 2.52%.
