Dividend Beyond the Border

One of my investment objectives is to generate passive income from investments, including dividend-paying stocks/ETFs. In the past couple of years, I have paid increasing attention to stocks that pay generous dividends. Using mostly DRIP stocks and exchange-traded funds, I have built a small portfolio aimed to generate passive income. Recently, I reshuffled that portion of my investments by eliminating two PowerShares dividend ETFs, PFM and PEY, and concentrated on using ADVDX as the main dividend generator.

Looking at my current holdings (ADVDX, PID, BAC, MO, PG, PGN), I have about 63% in US stocks and 36% in foreign equities from two funds, ADVDX and PID. The reason to have foreign dividend-paying stocks is for income and growth from economies outside the US, especially in an environment that features weakening US dollar.

While searching for domestic stocks that pay good dividends is easy, it’s not always straightforward to identify dividend-paying stocks from other countries. Plus, US investors may not have direct access to those foreign stocks. In this case, the simplest way to add international exposures in dividend investment is using mutual funds and ETFs.

After going through Morningstar’s ETF section, I picked up 4 international dividend players:

  • First Trust DJ STOXX Select Dividend 30 (FDD): Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and UK;
  • iShares Dow Jones EPAC Select Dividend (IDV): Australia, UK, Hong Kong, New Zealand, Canada, Singapore, Italy, Netherlands, Greece, France, Denmark, Sweden, Norway, and Japan;
  • WisdomTree Europe Total Dividend (DEB): UK, France, Germany, Italy, Spain, Netherlands, Switzerland, Sweden, Finland, Belgium, Norway, Greece, Portugal, Denmark, Austria, and Ireland;
  • PowerShares International Dividend Achievers (PID): UK, Canada, Spain, Bermuda, Australia, Sweden, Ireland, Japan, China, and others.

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Except PID, which is the oldest and largest international dividend ETF, all the other three funds only have a few months of history, making them difficult to evaluate in terms of performance. It’s clear from the above country diversification, that both FDD and DEB focus mainly on developed European markets, while IDV and PID also have Asia exposures, which help PID’s return so far this year. The following is the performance comparison between PID and iShares MSCI EAFE Index Fund (EFA) in the past two years. As the plot shows, PID’s performance is very close to that of EFA, but with a higher dividend yield (EFA has a yield of 1.79%).

pid.png

Key data of the four funds is shown in the following table (as of November 2).

Fund symbol ER (%) Yield (%) Div freq. YTD return (%)
FDD 0.60 4.18 Quarterly 2.30
IDV 0.50 5.32 Quarterly 2.74
PID 0.60 2.45 Quarterly 18.63
DEB 0.48 0.30 Annually 16.43

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3 Responses to “Dividend Beyond the Border”

  1. The Dividend Guy |  Nov 06, 2007 at 10:57 pm

    Good post Sun – I have also looked into these and really like the iShares Dow Jones EPAC Select Dividend because of its large geographic region that it covers.

    The Dividend Guy

  2. Jonathan |  Nov 09, 2007 at 7:28 am

    I wish there was an ETF version of ADVDX for convenience.

  3. Living Off Dividends |  Nov 11, 2007 at 6:34 pm

    good post.

    I looked at ADVDX but a lot of the dividends are from capital gains. thats not the same thing!