In a recent Wall Street Journal article, “The Dividends From Far, Far Away,” Shefali Anand discusses reasons dividend-seeking investors should invest abroad.
Dividend-paying funds and stocks are traditionally safer bets in difficult markets such as the current one. Many of the highest yielding stocks in the US are financials and they have been hurt by this market. It is not known when companies such as Citigroup and Merrill Lynch will recover from recent troubles.
Foreign stocks have much more attractive yields today than domestic stocks. A leading index of big-cap stocks in developed overseas markets yielded a 3.7% payout as of July 31. This is comparable to a 2.4% rate for similar US stocks. There was a time when US companies had much higher payouts, but over recent decades, US companies have retained more earnings to put back into the business.
Overseas dividend ETFs range from broad funds such as the PowerShares International Dividend Achievers Portfolio (PEY) yielding 4.1% to more specialized funds such as the WisdomTree International SmallCap Dividend (DLS) which yields 2.6%. These are two of the largest ETFs, with slightly more than $460 million in assets.
Steve Janachowski, a financial advisor in Tiburon, California, suggests looking at a “global” fund, such as the Tweedy Browne Worldwide High Dividend Yield Value Fund, which was launched last year.