Tuesday, March 18, 2014

Global High Yield Dividend ETFs


In a global economy, today's investors need exposure to international equities to take advantage of the growth and dividend income that they provide. Global High Yield Dividend ETFs provide a great way to invest in international equities without the elevated risk of unknown individual corporations in oversea markets. A lot of international equities pay a handsome dividend and provide fantastic investment returns, so an investor who does not have access to buy them directly can gain access to these corporations via the following ETFs.


In my hunt to increase my current income coupled with a need for global diversification, I started exploring options for International Dividend ETFs. The largest and most popular ETFs with the juiciest yield are listed below. All holdings in the funds discussed below are in equities.
  1. Global X SuperDividend ETF (SDIV) tracks the performance of 124 equally weighted companies that rank among the highest dividend yielding equity securities in the world.
  2. Guggenheim S&P Global Dividend Opportunities Index ETF (LVL) is comprised of 101 common stocks, MLPs and ADRs that offer high dividend yields chosen from countries included in the S&P Broad Market Index. The constituents consist of stocks, MLPs and ADRs with market cap greater than $1.5B.
  3. SPDR S&P International Dividend ETF (DWX) includes 116 companies with a biased weighting towards mid-to-large cap.

Fund Name
Ticker MER
Yield
%
No of
Holdings
Market Cap Breakdown
Mega-Large-Mid-Small-Micro
%
Global X SuperDividend ETFSDIV0.586.551249.2 - 17.2 - 45.1 - 19.5 - 5.14
Guggenheim S&P Global
Dividend Opportunities Index ETF
LVL0.606.5210110.1 - 24.6 - 50.6 - 12.8 - 1.75
SPDR S&P International Dividend ETFDWX0.456.7611615.2 - 33.73 - 43.47 - 2.05 - 0

Geographic Allocation

SDIV has a slight inclination towards equities based in the US with a 27% allocation. The other two funds have highest fund allocation in Australia with DWX completely invested in non-US equities. All funds have the highest regional allocation to Europe with SDIV at 32.59%, LVL at 35.14% and DWX at 39.93%.

ETF
 US / Intl
Allocation
%
 Developed / Emerging
%
Top Allocation
 SDIV 27 / 7294.34 / 4.06USA (27%)
LVL16 / 8386.89 / 13.07Australia (20%)
DWX0 / 99.8583.31 / 14.44Australia (22%)

Sector Allocation

SDIV's largest sector allocation is in Real Estate. Both LVL and DWH have largest sector allocation in Communication Services. For the most part, LVL and DWH have very similar sector weightings.

Sector
 SDIV
%
 LVL
%
 DWH
%
Financials19.0515.2314.73
Industrials9.799.7312.17
Materials2.86.514.92
Energy5.1312.7912.59
Real Estate21.769.69.01
Cons Cyclical5.346.716.13
Cons Defensive2.674.421.41
Comm Services11.6218.3717.51
Technology2.6800.66
Healthcare4.813.122.75
Utilities12.7413.4814.23


Metrics To Judge By

Metrics such as sector allocation, number of holdings, expense ratio fees, annual yield, market cap size exposure etc need to be considered before I make a final decision on the ETF to pick.
  • Number of holdings: When investing in ETFs, I like broader indices and look for more holdings as I like to mitigate risk. SDIV has the highest number of holdings with 124 equities in total. Winner: SDIV.
  • MER: I like to keep my costs down - simple as that. Winner: DWX.
  • Yield: I have already dropped a couple of names from this list of global dividend ETFs yielding less than 2%. Since most of the funds yield the approximately same, this will be a tie on the yield metric Winner: Tie.
  • Geographic Allocation: I am already invested in a lot of US stocks and the point of this exercise is to look for international diversification, I would want higher more non-US exposure. Winner: LVL and DWX.
  • Sector Allocation: I like more balanced funds. SDIV is very concentrated in Financials with an allocation of almost 40% Financials + Real Estate. Winner: LVL and DWX.
  • Distribution frequency: I like to see the distributions paid out frequently. SDIV pays on a monthly schedule whereas LVL and DWX pay on a quarterly schedule. Winner: SDIV.
  • Stable Income: The objective of this exercise and the potential holding needs to provide a stable income stream. Although all funds have the same annual yield rate, SDIV is the only fund that has the same stable payment month after month. Both LVL and DWX have a variable pay amount for each quarter. Winner: SDIV.
Final Score: Based on the metrics above, giving a point for each metric we get: SDIV = 4. LVL = 3. DWX = 4.

I am still undecided which one offers the best rewards, but I like DWX even though it loses on the points of # of holdings, distribution frequency and stability of income, the ETF has the lowest fee, good geographic allocation with a decent exposure to emerging markets (which SDIV lacks) and the overall sector allocation.

What do you think of these Global High Yield Dividend ETFs? Do you own any of these ETFs in your portfolio? What are your thoughts on the metrics discussed above? I would love to hear your thoughts on these ETFs. Leave a comment below to start a discussion.

Disclosure: None. My full list of holdings can be found here.

This article first appeared on roadmap2retire.com


Image Source: freedigitalphotos.net

4 comments:

  1. Nice breakdown R2R. Readers of my Seeking Alpha ETF articles have been huge fans of SDIV. I'm probably not a candidate for them because of the relative small number of holdings. I want my index funds to have hundreds of companies..... or to own individual companies and research the heck out of them. SDIV kinda falls in between. Again, thanks for the great breakdown
    -Bryan

    ReplyDelete
    Replies
    1. Glad you like it, Bryan. Agreed that these ETFs are not a replacement for a broad index consisting of thousands of companies like VTI or VXUS. Still a good play on income with international exposure and am considering possibly adding one to my portfolio.

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  2. R2R,
    Interesting choices here and great yields for ETFs. I also look at volume on ETFs and LVL is much lower compared to the other 2. That makes me want to lean away from LVL for liquidity reasons. But these are good suggestions and a great way to get some more international exposure.
    -RBD

    ReplyDelete
    Replies
    1. RBD,
      Thanks for bringing to my attention the important factor of volume. I will have to go back and look at how SDIV and DWX compare based on volume. Thanks for stopping by and the comment.

      regards

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