Four ETFs For The Income-Minded International Investor

By Todd Shriber | November 02, 2009 AAA

There are a few certainties in the world of investing. One is that dividends are a good. Another is that international companies generally pay better dividends than their U.S. counterparts. Next, stock-picking in foreign markets isn't always easy for U.S. investors.

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If you find yourself on the hunt for global dividends (and you should be), don't worry. There are plenty of exchange traded funds (ETFs) to help you garner fat yields without having to devote days of research on foreign stocks. With that, we decided to look for several international ETFs that should appeal to income investors. We sought out ETFs that hold high-quality stocks with reliable dividend histories that focused on sectors that are typically viewed as safe dividend bets.

  • WisdomTree International Utilities ETF (NYSE:DBU) Yield: 3.9%

  • iShares S&P Global Telecommunications ETF (NYSE:IXP) Yield: 5%

  • WisdomTree International LargeCap Dividend ETF (NYSE:DOL) Yield: 8%

Utilities: Always a Dividend Lover's Dream
The utilities sector, regardless of home domicile, is usually a favorite of dividend hunters. U.S. utilities pay good dividends with strong yields. International utilities often pay better dividends with comparable or stronger yields. From a competitive standpoint, international utilities are much like their U.S. brethren. They operate as near-monopolies and generate predictable, steady profits and that results in great dividends.

That's what makes the WisdomTree International Utilities ETF so appealing. Familiar names include National Grid (NYSE:NGG) of the U.K. and Germany's RWE AG. DBU is small compared to its peer group, with less than $39 million in assets (the average comparable ETF has over $258 million in assets) and the ETF is up just over 2% year-to-date. Then again, investors bet on utilities to get paid, not for capital appreciation, and that makes DBU's yield of 3.9% all the more attractive.

Put a Call into this ETF
The iShares S&P Global Telecommunications ETF isn't a pure international play as AT&T (NYSE:T) and Verizon (NYSE:VZ) can be found among the top 10 holdings, but like utilities, telecoms are another surefire dividend and yield play. Other top holdings include Mexico's America Movil (NYSE:AMX), China Mobile (NYSE:CHL) and France Telecom (NYSE:FTE), all fair yielders on their own. The focus on quality names is one reason to like IXP, which has $244 million in assets. IXP has a fair expense ratio of 0.48% and yields a decent 5%. If you're looking to get paid from domestic and international telecoms, IXP may be the way to go.

A Nice Sector Mix
The WisdomTree International LargeCap Dividend ETF doesn't focus on one specific sector, but it does have a bias toward some of the higher quality global dividend stocks. China Mobile can be found here, as can hefty oil yielders BP (NYSE:BP) and Total (NYSE:TOT). Nestle and Banco Sander Chile (NYSE:SAN) round out a nice sector mix among the top holdings.

Dividend stocks have a tendency to outperform those that don't pay their shareholders, and international stocks have been hot this year, so it's no surprise DOL is up 21% year-to-date. DOL is thinly-traded and has just $117.3 million in assets, but those factors shouldn't dissuade you. If anything, the 8% yield should entice you.

The Bottom Line: Span the Globe to Get Paid
Let's make this easy: International dividends are sure to provide a jolt to your portfolio, but there's no need to make yourself crazy looking for them. This trio of dividend-paying ETFs is ideal for the income investor with a long-term time horizon. (For more, check out our Investopedia Special Feature: Exchange Traded Funds.)

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