{"id":36777,"date":"2013-03-11T11:24:35","date_gmt":"2013-03-11T15:24:35","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=36777"},"modified":"2013-03-11T11:24:35","modified_gmt":"2013-03-11T15:24:35","slug":"choosing-the-best-european-dividend-etf","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/03\/11\/choosing-the-best-european-dividend-etf\/","title":{"rendered":"Choosing the Best European Dividend ETF"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

Last year, I compared U.S. dividend ETFs<\/a><\/strong> and gave readers a simple choice.\u00a0 If you want current income, a high-yielding option like the iShares Dow Jones Select Dividend ETF (NYSE:$<\/span>DVY<\/a>)<\/b> is your best option.\u00a0 But for long-term growth, you might be better off investing in the Vanguard Dividend Appreciation ETF (NYSE:$<\/span>VIG<\/a>).<\/b>\u00a0 Though it yields little more than the broad S&P 500, it\u2019s comprised of companies with a long history of raising their dividends.\u00a0 I consider the ETF to be a one-stop shop for high-quality growth companies.<\/p>\n

I utilize both ETFs in my portfolios.\u00a0 VIG is the largest holding in both my Tactical ETF Portfolio<\/a><\/strong> and in my Strategic Growth Allocation<\/a><\/strong>, and DVY is a core income holding in my Strategic Growth Allocation.<\/p>\n

But what about European dividend payers?\u00a0 After two years of crisis, European stocks are cheaper than their American rivals, and they tend to pay out a higher percentage of their profits as dividends.<\/p>\n

Here, investors have several viable choices. The first is the STOXX European Select Dividend ETF (NYSE: $<\/span>FDD<\/a>)<\/b>.\u00a0 This ETF holds 30 of Europe\u2019s highest yielders, offering a juicy 4.9% dividend.\u00a0 Unfortunately, it is a little too heavily weighted in financials for my liking.\u00a0 Nearly 40% of the ETF is invested in banks and insurance companies; I\u2019d prefer to see that number well below 20% given the current macro risks to Europe\u2019s financial system.\u00a0 That said, one of FDD\u2019s largest holdings is Spain\u2019s Banco Santander (NYSE:$<\/span>SAN<\/a>),<\/b> which I own in my aggressive Sizemore Investment Letter portfolio<\/a>.<\/p>\n

WisdomTree offers an ETF that offers a high dividend yield but with zero exposure to the financial sector: the International Dividend ex-Financials ETF (NYSE:$<\/span>DOO<\/a>).<\/b><\/p>\n

Though not technically a \u201cEurope fund,\u201d as it has exposure to Australia, Japan, and other developed markets, 70% of the fund is invested in European stocks.\u00a0 And for a high-yielding, dividend-focused ETF, the fund is surprisingly light in utilities.\u00a0 Utilities are only 14% of the portfolio as of early March, which I consider a positive.\u00a0 Utilities are slow-growth (and arguably no-growth) industries in much of the developed world.<\/p>\n

DOO sports a dividend yield of 4.0%, which is remarkable given its sector diversification.\u00a0 In an income-oriented portfolio, WisdomTree\u2019s offering is not a bad choice.<\/p>\n

Finally, I\u2019d like to touch on the PowerShares International Dividend Achievers ETF (NYSE:$<\/span>PID<\/a>),<\/b> which is essentially an international version of the Vanguard Dividend Appreciation ETF I mentioned at the beginning of this article.\u00a0 Like DOO, PID is not technically a \u201cEurope fund,\u201dbut Europe is the largest geographic area represented.<\/p>\n

There are a few idiosyncrasies worth noting.\u00a0 To be included, a company must be incorporated outside the United States but must trade as an ADR, GDR or on the U.S. or London exchanges.\u00a0\u00a0 The ETF is weighted by dividend yield, so the stock with the highest weighting, at 4.5%,\u00a0 is Teekay Offshore Partners (NYSE:$<\/span>TOO<\/a>)<\/b>.\u00a0 Tanker stocks are volatile, and this is not the sort of stock I would normally want in a conservative dividend portfolio.\u00a0 Unilever (NYSE:$<\/span>UN<\/a>, NYSE:$<\/span>UL<\/a>)<\/b> is a stock that I would<\/i> (and, in fact, do) put in a conservative dividend portfolio, but it is included in the PowerShares ETF twice: once for the Dutch-traded shares (UN) and once for the British-traded shares (UL).<\/p>\n

Still, even with its quirks, PID is an excellent ETF choice for all of the same reasons as VIG.\u00a0 There is no better signal of quality than a consistent history of raising a company\u2019s dividend.<\/p>\n

PID yields less than the other ETF options, at 2.6%.\u00a0 But like VIG, it should be considered a high-quality growth ETF rather than a pure income ETF.<\/p>\n

Disclosures: Sizemore Capital is long VIG, DVY, PID and UL. \u00a0This article first appeared on MarketWatch<\/a>.<\/p>\n

SUBSCRIBE\u00a0<\/a><\/strong>to\u00a0Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

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The post Choosing the Best European Dividend ETF<\/a> appeared first on Sizemore Insights<\/a>.<\/p>\n

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