How To Tap Into Developed Market Dividend Growth
Summary Developed markets offer attractive dividend growth opportunities. A highlight of the ProShares MSCI EAFE Dividend Growers ETF. Breakdown of developed countries and their dividend prospects. By Todd Shriber & Tom Lydon The U.S. remains the benchmark destination for dividend growth, but some other developed markets are credible payout growth destinations. That theme can be accessed with several exchange traded funds, including the ProShares MSCI EAFE Dividend Growers ETF (NYSEArca: EFAD ) . EFAD, which debuted in August, tracks MSCI EAFE Dividend Masters Index, which holds members of the MSCI EAFE Index that have increased their dividends for at least 10 straight years. The emphasis on dividend increase streaks is the backbone of some of the most popular U.S.-focused dividend ETFs. At the country level, EFAD is top heavy as over 48% of its geographic weight is allocated to the U.K. However, that is not a problem for an international dividend growth ETF because the U.K. is one of the best, if not the best, ex-U.S. dividend growth markets. In 2014, U.K. firms once again offered excellent dividend growth. Payouts there surged 31% to $135 billion, according to Henderson Global Investors. Despite the overweight U.K. position, EFAD’s other country holdings offer ample room for dividend growth as highlighted by the ETF’s 1.2% 30-day SEC yield. Japan, EFAD’s third-largest country allocation at nearly 8%, is finally starting to climb the dividend ladder. For the year ended March 31, total dividends paid in Japan are expected to have risen 13% to $79.5 billion. It is estimated that total payouts in Japan this year will be more than triple the number seen in 2013. The average dividend yield for Tokyo Stock Exchange first-section companies, which include almost all of Japan’s top names, is 1.36%, according to the Wall Street Journal . Switzerland, EFAD ‘s second-largest country weight at 9.8%%, is one of the steadiest Europe ex-U.K. Dividend growth markets. Estimates indicate that in 2014, the 20 largest firms listed on Switzerland’s benchmark Swiss Market Index paid a record $37.2 billion in dividends. Australia, EFAD’s fourth-largest country weight at almost 5.6%, is another high-yielding developed dividend growth market. “According to figures from Bloomberg and Lincoln Indicators, that has seen dividend payouts by Australia’s top 200 companies jump by 64 per cent in 5 years – from $38 billion in 2010 to $62 billion to date this financial year,” according to Australia’s ABC News . Australia is one of the countries where the dividend yield on the benchmark equity index is higher than the yield on government bonds. Investors are starting to embrace EFAD’s story as the ETF has more than doubled in size during the second quarter. ProShares MSCI EAFE Dividend Growers ETF (click to enlarge) Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.