For many investors, international diversification can be an important and underutilized part of their portfolios. International diversification ensures that the investor does not depend on one or only a few economies for their returns. While there are multiple ways investors can gain access to international markets, international income-generating ETFs can be a good portfolio addition for a variety of investors. We’ll take a look at international equity, debt, and real estate income-generating ETFs.
Global X SuperDividend ETF
The Global X SuperDividend ETF (SDIV) tracks the performance of 100 of the highest dividend yielding stocks in the world. The index is equally weighted with each stock representing approximately 1% of the ETF. SDIV offers good income potential, delivering a 7.32% distribution yield for the trailing twelve months. Also of interest to investors looking to generate regular income, SDIV historically has paid a monthly distribution.
SDIV is a global ETF and includes international as well as United States stocks. Currently, the ETF is made up of about 31% of United States based stocks. The fund has good exposure to Asia-Pacific (30%) and Europe (28%) with less exposure to the Middle East, Africa, and Latin America.
The SuperDividend ETF has a 0.58% net expense ratio and total assets of $845 million.
Guggenheim S&P Global Dividend Opportunities Index ETF
The Guggenheim S&P Global Dividend Opportunities ETF (LVL) tracks an index of 100 high yielding international stocks. The fund has paid a 6.65% distribution yield for the trailing twelve months and pays distributions quarterly.
LVL has good international diversification with the United States-based companies making up 19% of the assets of the index. Similar to other funds, we see a strong representation of companies from Europe (39%), Asia-Pacific (29%) and North America (26%) with fewer companies from the Middle East, Africa and Latin America.
The fund charges a high net expense ratio of 1.08% and also is a smaller fund with $54.8 million total assets.
Developing An ETF Investing Plan
First Trust DJ Global Select Dividend Index Fund
Similar to other funds, the First Trust Dow Jones Global Select Dividend Index Fund (FGD) tracks an index of 100 high yielding international stocks. FGD has paid distributions yielding 5.85% over the trailing twelve months. The fund pays its distributions quarterly.
This ETF has good diversification across sectors will the largest concentration in the financial sector at 21% of the fund. FGD also has a lower concentration of United States based stocks with 18% of the fund’s assets invested in the United States.
FGD has a net expense ratio of 0.60% and $407 million in total assets.
SPDR S&P Global Dividend ETF
The SPDR S&P Global Dividend ETF (WDIV) tracks the S&P Global Dividend Aristocrats Index, which tracks global companies offering high dividend yields. WDIV has paid investors a 4.42% distribution yield over the trailing twelve months.
Like many ETFs on this list, WDIV has higher exposure to the financial sector, with financial sector firms making up 25% of the fund. The fund is more weighted towards Europe and North America with European firms constituting 41% of the fund and North American firms making up 39% of the fund.
WDIV charges a net expense ratio of 0.40% and is a smaller fund with $73 million in total assets.
Invesco International Corporate Bond Portfolio
This Invesco International Corporate Bond ETF (PICB) tracks the S&P International Corporate Bond Index. The fund has provided investors will a 2.46% distribution yield over the trailing twelve months. The fund provides distributions monthly.
PICB does not hold bonds from United States firms. Firms from the United Kingdom, France, Netherlands, Canada, and Italy have the largest presence and represent approximately 78% of the fund’s assets.
PICB charges a net expense ratio of 0.50% and has total assets of $187 million.
Market Vectors International High Yield Bond ETF
The Market Vectors International High Yield Bond ETF (IHY) invests in high yielding bonds from around the world. The fund has paid investors an attractive 5.79% distribution yield over the trailing twelve months with distributions paid monthly.
The fund has high exposure to Europe as the top five countries represented in the fund are Luxembourg, United Kingdom, France, Netherlands, and Italy. Bonds from these five countries represent about 53% of the ETF’s assets.
The fund charges a net expense ratio of 0.40% and has total assets of $139 million.
Vanguard Total International Bond ETF
The Vanguard Total International Bond ETF (BNDX) tracks international investment grade bonds. The fund has paid investors a 1.48% distribution yield over the trailing twelve months and pays distributions monthly.
This ETF is more conservative than the other bond ETFs discussed here and invests in both corporate and government bonds. Government bonds make up a majority of the holdings. The top five holdings are from the governments of Japan, Italy, France, UK, and Germany.
As with most Vanguard funds, BNDX has a low net expense ratio of 0.19%. The ETF has total assets of $3.9 billion.
SPDR Dow Jones International Real Estate ETF
The SPDR Dow Jones International Real Estate ETF (RWX) tracks the Dow Jones Global ex-U.S. Select Real Estate Securities Index. The ETF has paid a 2.98% distribution yield over the trailing twelve months.
The fund invests in REITs not located in the United States. The fund’s top five countries by investment dollars are Japan, United Kingdom, Australia, France, and Canada. The ETF invests in all real estate sectors but has a high concentration in real estate development and operations REITs and commercial REITs.
RWX charges a net expense ratio of 0.59% and currently has $4.72 billion in total assets.(For general information on REITs, read more, here: Real Estate Investment Trusts (REITs).)
Vanguard Global ex-U.S. Real Estate ETF
The Vanguard Global ex-U.S. Real Estate ETF (VNQI) covers approximately 500 real estate firms from over 30 countries. The fund has paid a 3.76% distribution to investors over the trailing twelve months.
The top five countries represented in the index are Japan, Hong Kong, United Kingdom, Australia and France. The fund was launched in November of 2010 and has provided investors with a 3.83% annual return over the last five years.
VNQI charges a low expense ratio of 0.24% and has $3 billion total assets.
iShares International Developed Real Estate ETF
The iShares International Developed Real Estate ETF (IFGL) covers 196 real estate firms from developed economies excluding the United States. The fund has paid a distribution yield of 3.67% over the trailing twelve months. The fund has returned an annualized return of 3.75% over the previous five years.
IFGL charges investors an expense ratio of 0.48% and has total assets of $658 million.
The Bottom Line
International income-generating ETFs may be compelling additions to many investors’ portfolios. These assets provide an income stream and also offer the advantages of international diversification. Investors have many choices when considering investment in international income-generating ETFs. The investor will have to consider their investment goals, risk appetite, and fees to select the right ETF or portfolio of ETFs.