As 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
REIT ETFs Crushed: Time to Panic?
After all, long term bond
have lost more than 15% in the past three months, while many REIT
ETFs, such as
, 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
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
Vanguard FTSE Europe ETF (
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
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 (
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.
IDV has also had a solid past month, gaining about 4.1% in the
time frame. Plus this ETF is also sporting a 12 month yield
around the 5.0% level, while its 30-Day SEC Yield comes in at
4.9% (also see
Can This High Yield European ETF Surge
WisdomTree Europe SmallCap Dividend ETF (
For a small cap look at the solid trends appearing in Europe,
WisdomTree's DFE could be an excellent choice. This product
follows a dividend-weighted index, giving investors exposure to
about 230 small cap securities in Europe.
Industrials take the top allocation from a sector look (25%),
followed by consumer discretionary (15%) and technology (14%).
Country exposure is once again focused on the UK, while Sweden
and Italy also receive double digit allocations.
Of the group, this small cap ETF has actually had the best
month, adding about 6.4% in the time frame. Its yield leaves a
little to be desired at 3.4%, though it is still definitely an
income destination for most investors at this time.
Talk of the taper in the U.S. market has crushed a number of
yield-focused securities lately. Many products in this space have
seen losses exceeding 10% in the past three months, marking the
first big losses for many of these product categories.
This has forced many investors to go off the beaten path in
order to find high yielding securities that aren't facing such
severe capital losses as well. Three such options in this market
are VGK, IDV, and DFE, as all three of these pay great yields and
have beaten out the S&P 500 over the past month (also read
3 ETFs for Rising Interest Rates
So if you are in the market for yield but are concerned about
the recent trends in the space, consider the aforementioned ETFs
as some overlooked plays that could be better choices in this
uncertain time for income-centric investors.
Want the latest recommendations from Zacks Investment
Research? Today, you can download
7 Best Stocks for the Next 30 Days
Click to get this free report >>
WISDMTR-EU SC D (DFE): ETF Research Reports
ISHARS-INTL SD (IDV): ETF Research Reports
ISHARS-US REAL (IYR): ETF Research Reports
VANGD-FTSE EUR (VGK): ETF Research Reports
VIPERS-REIT (VNQ): ETF Research Reports
PIMCO-25Y ZERO (ZROZ): ETF Research Reports
To read this article on Zacks.com click here.
Want the latest recommendations from Zacks
Investment Research? Today, you can download 7 Best Stocks for
the Next 30 Days. Click to get this free report