Top 3 International Dividend ETFs to Invest in Today

With a flip of the switch, BlackRock (NYSE:BLK) recently completed the company’s first mutual fund-to-ETF conversion, a move made to meet investors’ insatiable thirst for active management. 

The BlackRock International Dividend Fund was launched in September 1997 and converted on Nov. 15 into the BlackRock International Dividend ETF (NYSEARCA:BIDD). The fund had approximately $760 million in net assets. 

Investors prefer ETFs to mutual funds for several reasons. BIDD charges 0.61%, whereas the old mutual fund charged anywhere from 0.61% to 1.65%, depending on the share class. 

If you want to expand your dividend investments beyond the U.S., BlackRock’s new dividend ETF is one way to go. Here are three others you might want to consider for your dividend-income-focused portfolio.  

Key Points About This Article:

• iShares International Dividend Growth ETF (Cboe BZX:IGRO) has over one-fifth of its net assets invested north of the border.  
• Xtrackers MSCI EAFE High Dividend Yield Equity ETF (NYSEARCA:HDEF) charges very little for an international ETF. 
• The hedging provided by WisdomTree International Hedged Quality Dividend Growth Fund (NYSEARCA:IHDG) is worth the admission fee. 
• Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “2 Legendary High-Yield Dividend Stocks” now.

iShares International Dividend Growth ETF (IGRO)

iShares International Dividend Growth ETF (Cboe BZX:IGRO), unlike BIDD, is a passively managed ETF from BlackRock that invests in international dividend stocks. IGRO tracks the performance of the Morningstar Global ex-US Dividend Growth Index, a collection of international equities that have a consistent history of paying dividends. 

To be eligible for the index, a stock must have grown its dividend annually for at least five consecutive years with a dividend payout ratio of less than 75%. The index excludes stocks with a dividend yield in the top 10% in a given geographic region. 

IGRO charges just 0.15% or $15 per $10,000 invested. That’s one-quarter the cost of BIDD, BlackRock’s actively managed ETF. It currently has $897 million in net assets invested in 398 holdings. Its yield is 2.57%, more than double the S&P 500 yield. 

The top three countries by weight are Canada (20.62%), Japan (20.35%), and Switzerland (10.52%). By sector, it is financials (27.48%), industrials (14.52%), and health care (14.21%). Large-cap stocks account for 89% of the ETF’s portfolio. 

The top 10 holdings represent 27% of the fund’s net assets. Two of the top 10 are Canadian banks: Toronto Dominion Bank (NYSE:TD) and Royal Bank of Canada (NYSE:RY). 

Launched in May 2016, it has an annualized total return of 7.39% since inception through Oct. 31.   

Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF)

Xtrackers MSCI EAFE High Dividend Yield Equity ETF (NYSEARCA:HDEF) tracks the performance of the MSCI EAFE High Dividend Yield Index. The ETF’s current yield is a healthy 4.33%, nearly double IGRO.

Launched in August 2015, the ETF uses a full replication strategy rather than a sampling strategy, which means the weights of the ETF’s holdings are virtually identical to those in the index. However, should the fund be unable to own specific components of the index, it can pursue a representative sampling indexing strategy instead. 

The index components include companies from 20 countries in EAFE (Europe, Australasia, and the Far East), including Australia, Austria, Belgium, China, Denmark, Finland, France, Germany, Hong Kong, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and the United Kingdom.

HDEF has $1.66 billion in net assets invested in 116 stocks. The top 10 holdings account for nearly 41% of these holdings. The top three sectors by weight are financials (23.66%), consumer staples (16.32%), and health care (14.75%). The top three countries by weight are the United Kingdom (20.89%), Switzerland (20.38%), and France (15.22%). 

The ETF charges 0.09%, which is six basis points less than IGRO. Since its inception in 2015, it has an annualized total return of 5.30%.   

WisdomTree International Hedged Quality Dividend Growth Fund (IHDG)

The WisdomTree International Hedged Quality Dividend Growth Fund (NYSEARCA:IHDG) yields 1.76%. Although that is less than the other two ETFs on my list, it makes up for this with an average annual return of 9.39% through Oct. 31 since its inception in May 2014.    

The ETF tracks the performance of the WisdomTree International Hedged Quality Dividend Growth Index, a collection of the top 300 companies from the WisdomTree International Equity Index. The companies in the top 300 are ranked based on growth and quality factors.  

“The growth factor ranking is based on long-term earnings growth expectations, while the quality factor ranking is based on three year historical averages for return on equity and return on assets,” states the index’s webpage. 

The holdings are weighted by the annual cash dividends paid. For example, if Company A paid $2 in annual dividends, and Company B paid $3, and the entire group of 300 paid $600 in annual dividends, Company A would have a 0.33% weight ($2 divided by $600), and Company B’s would be 0.5%.

The index and ETF are reconstituted annually. 

IHDG has $2.68 billion in net assets, of which the top 10 holdings account for 33%. The top three sectors by weight are industrials (20.18%), consumer discretionary (17.65%), and health care (16.59%). The top three countries by weight are the United Kingdom (18.52%), Japan (17.81%), and Germany (10.21%). 

While it charges the highest amount of the three ETFs at 0.58%, the portfolio’s various currencies are hedged to the U.S. dollar, neutralizing currency fluctuations, which is important when investing outside the U.S.