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August 23, 2013 at 14:10 PM EDT
3 High Dividend ETFs To Play Even If The Fed Tapers
NYSEARCA:VGK, NYSEARCA:DFE, NYSEARCA:IDV Related posts: Why High Yield ETFs Have Stumbled And How To Play Them EGShares Launches New Emerging Market Dividend High Income ETF (EMHD) This High Dividend Yield Financial ETF Offers Some Great Income Emerging Global Advisors Launches EGShares EM Dividend High Income ETF (NYSEArca:EMHD) New Research From Global X Funds Examines The Case For High-Dividend Equity Investments

yieldAs yields continue to rise on benchmark government debt, many investors are starting to panic about the income producing securities in their portfolios. These investments—be they in the REIT, utility, or even bond segments—have been crushed over the past month or so, leading many to abandon high income picks altogether.

After all, long term bond ETFs like (ZROZ) have lost more than 15% in the past three months, while many REIT ETFs, such as (IYR) or (VNQ), have plunged by a similar amount in the same time frame. These securities—and ones holding similar assets—have been mainstays of portfolios for quite some time, leaving some investors at a loss for where to go for generating solid amounts of income in this type of environment.

Look to Europe Instead

While many emerging market securities have been impacted by this trend as well, some in international developed markets have held up in this environment. These have actually appreciated as of late, and they still provide investors with solid yields too.

In particular, many key European markets have apparently turned it around in recent months, pushing up asset prices across the continent. Add this to a bout of euro currency strength, and dollar-denominated investors see a solid trend in place for European securities (see all the European Equity ETFs).

These European stocks may thus prove to be relatively-well insulated from the current bout of Fed taper talk and thus be better dividend choices in this kind of market environment. Plus, thanks to some sluggish trading until very recently, many European stocks are trading at decent values, something that can’t really be said for many of their peer high dividend securities in the U.S.

Given this, investors can certainly look abroad for yield at this time, especially considering the price appreciation in many markets as of late. For an easy way to do this while obtaining exposure across a number of developed markets, any of the following dividend-focused ETFs could easily accomplish the task:

Vanguard FTSE Europe ETF (VGK)

This is one of the most popular European ETFs on the market, with assets of nearly $8 billion. The product is also relatively cheap, charging investors just 12 basis points a year in fees, while seeing solid volume of 2.3 million shares a day.

The fund has roughly one-fifth of its assets in the financials sphere, followed by consumer staples (14%), health care (12%), and industrials (12%). British stocks take the biggest holding, followed by Swiss companies, then a variety of euro zone nations (also see 3 European ETFs Holding Their Ground).

The product has added about 3.1% over the past month, compared to a 2.4% loss for the S&P 500 in the same time frame, or a nearly double digit loss for a REIT ETF. However, the 12 month yield for this fund comes in just under 5%, making it a very solid income destination.

iShares International Select Dividend ETF (IDV)

For a broader international dividend play, investors could consider IDV. This product tracks the Dow Jones EPAC Select Dividend Index, a benchmark of roughly 100 companies from around the developed world.

The ETF skews towards Europe (roughly two-thirds of the portfolio) though a few nations like Australia and Canada make up sizable allocations as well. This product also offers a solid allocation to mid and small cap securities (nearly 30% of the portfolio), while its sector focus centers on financials, energy, utilities, and industrials.

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Related posts:

  1. Why High Yield ETFs Have Stumbled And How To Play Them
  2. EGShares Launches New Emerging Market Dividend High Income ETF (EMHD)
  3. This High Dividend Yield Financial ETF Offers Some Great Income
  4. Emerging Global Advisors Launches EGShares EM Dividend High Income ETF (NYSEArca:EMHD)
  5. New Research From Global X Funds Examines The Case For High-Dividend Equity Investments

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