Despite the recent calls and predictions for the Federal Reserve to raise interest rates, Yellen & Crew haven’t done so yet. And even when they do, the Fed isn’t going to go from zero to 15% overnight. So finding reliable income remains a top concern for investors going forward.
And a great way to find that income is thorough international dividend ETFs.
Exchanged-traded funds (ETFs) offer investors broad, cheap and daily tradable access to some of the world’s best dividend payers. And as fellow InvestorPlace contributor Daniel Putnam recently outlined, international dividend ETFs could be your best friends.
Higher dividend yields, dollar diversification as well as attractive valuations await investors willing to cross the pond and take a look at international dividend ETFs. And considering that low interest rates — even when the Fed raises them — are still here to stay, these dividend ETFs are worth serious consideration.
But how do you know which fund is the right choice for you? Luckily, we’ve done the leg work for you. Here are four of the best international dividend ETFs to buy today.
International Dividend ETFs To Buy #1: iShares International Select Dividend ETF (IDV)
Part of BlackRock’s (BLK) core lineup for iShares, the iShares International Select Dividend ETF (IDV) could be one of the best places to start when it comes to international dividend ETFs. The $4.3 billion ETF is one of the largest dedicated to the sector.
IDV tracks the Dow Jones EPAC Select Dividend Index, which is a measure of high-dividend-paying equities in non-U.S. developed markets. The intentional dividend ETF tracks high-paying equities and screens for those that have consistently paid those dividends over longer periods of time. That currently creates a portfolio 100 different non-U.S. stocks — like pharmaceutical firm AstraZeneca PLC (AZN) and French telecom Orange (ORAN).
It also provides IDV with a strong 4.9% dividend yield. That’s more than double the S&P 500’s current dividend yield of around 1.8%.
As far as performance, IDV hasn’t been too shabby. Over the last 5 years, the international dividend ETF has managed to produce an annual total return of nearly 8%. And as part of iShares core line, IDV’s expenses are pretty cheap as well. Currently, the international dividend ETF only charges 0.5% — or $50 annually per $10,000 invested.
International Dividend ETFs To Buy #2: FlexShares International Quality Dividend ETF (IQDF)
Not every stock that pays a high dividend yield is a good buy. In fact, sometimes a high yield can single problems at the company. To that end, finding “quality” dividend payers is equally as important as searching for high yields.
The FlexShares International Quality Dividend ETF (IQDF) is one of the new smart-beta ETFs to crop up in recent months. The international dividend ETF attempts to circumvent issues with just owning high yielding stocks by applying various screens. IQDF uses a proprietary scoring model that determines a “quality factor” of the underlying dividend payers. By looking at cash flows, earnings, revenue growth and management governance issues, the ETF should help prevent hiccups and avoid drops in dividends.
The $267 million ETF currently tracks 210 different developed market divided payers that meet its quality requirements.
The focus on quality helps on two fronts. First, the fund yields a healthy 3.9%. Secondly, IQDF has managed to put up an impressive performance in its short lifespan. Since its inception in April of last year, the international dividend ETF has managed to produce a return of 7.68%. That’s not a bad gain in such a short amount of time. IQDF has a net expense ratio of just 0.48%.
International Dividend ETFs To Buy #3: WisdomTree Emerging Markets Equity Income ETF (DEM)
The general perception is that emerging markets are risky and full of potentially “immature” companies. However, these international markets can be a fertile hunting for dividend investors and feature some great yields.
One of the key reasons is that many emerging market stocks actually feature huge founder and family ownership structures. Dividends represent one of the best ways for these owners to profit from their investment.
The $3.2 billion WisdomTree Emerging Markets Equity Income ETF (DEM) is still one of the best ways to play emerging market dividend payers.
The international dividend ETF tracks 340 different companies — many of which U.S. investors have never heard of. Padini Holdings? How about Tung Ho Steel? The benefit of using DEM to gain access to these emerging market dividend payers is getting a 4.5% distribution yield and 23% return since DEM’s inception in 2007.
That return beats the pants off many “regular” emerging markets ETFs.
The only real drawback to owning this international dividend ETF is DEM’s cost of ownership. The ETFs expenses are a bit on the high side at 0.63%.
International Dividend ETFs To Buy #4: iShares International Developed Real Estate ETF (IFGL)
Just like here in the U.S., some sectors outside our borders naturally yield more than others. One of the best income producers is commercial real estate. The number of nations that have adopted the real estate investment trust (REIT) structure continues to grow and capitalizing on that is the iShares International Developed Real Estate ETF (IFGL).
IFGL tracks 190 different intentional REITS, Real Estate Operating companies (REOs) and other global property owners. And like U.S. REITs, these firms pass on the majority of their income back towards investors in exchange for tax benefits.
Yields for international REIT ETFs are a bit tricky, because distributions can vary greatly from quarter to quarter. For example: Based on IFGL’s most recent distribution, the fund yields about 2.4%. But if you average the distributions from the past four quarters, that yield spikes to an eye-popping 11.6%!
Aside from the yield, IFGL provides access to uncorrelated asset class that most U.S. investors have zero exposure to.
Expenses for the ETF run a relatively cheap 0.48%. Considering IFGL’s huge yield and the fact that it’s one of the only funds that bets on international real estate, that expense ratio actually makes it quite a bargain.
As of this writing, Aaron Levitt was is long IFG.