With Treasury rates still near historic lows, many investors
are still avoiding T-bills for their current income needs. This
trend could continue well into the future as well, as the Fed
seems ready to buy more bonds if the economy stays in the
doldrums, suggesting that low rates-or possibly even more
depressed levels-could be here for quite some time to come.
As a result, many investors have looked to the top stocks in
the S&P 500 for their dividend exposure in this uncertain
time. However, many indexes of dividend payers in the American
market probably leave many investors wanting more.
After all, the broad S&P 500 yields just under 2%, while
SPDR S&P Dividend ETF (
offers up a 3.2% annual yield. Meanwhile, other popular
don't do any better as these two products, respectively, pay out
2.1% and 2.8% on an annual basis (See
Closed End ETFs for Forgotten 7% Yield?
Due to this, investors have a few options in terms of looking
for yield while staying in broad indexes. They can apply a more
targeted approach to sectors that are famous for being high
yielders or they can look internationally.
Surprisingly, there are a number of countries that have
benchmarks with incredible yields. There are actually several
ETFs tracking countries that have payouts in excess of 5%.
In other words, there are some nations out there that see
their main benchmarks paying out levels that are more than double
the S&P 500 index. For this reason it could be a good idea to
look abroad for payouts while still gaining exposure to a wide
basket of companies (see
These 2 ETFs Are Up More than 140% YTD
For these investors, we have highlighted three country ETFs
below that pay out shockingly high yields on a regular basis.
Many have likely overlooked these nations as yield destinations,
but hopefully the analysis below will help give investors a few
new ideas for regions that are still sporting truly impressive
yields with broad market funds:
iShares MSCI-Belgium ETF (
) - annual dividend 5.7%
Surprisingly, the tiny nation of Belgium is actually a popular
yield spot for investors. The country's main ETF, EWK, pays out a
robust 5.7% on an annual basis by tracking the MSCI Belgium
Investable Market Index.
This benchmark produces a fund that charges investors 52 basis
points a year in fees, although it does see low levels of
assets-- $25 million-yet volume is pretty good at 57,000 shares a
day. This suggests that total costs shouldn't be too bad in this
fund and that bid ask spreads will not reach into intolerable
Three Forgotten Ways to Play Europe with ETFs
A closer look at some of the fund's components should probably
shed some light on why the fund is such a high yielder as
takes the top spot at a whopping 27% of assets. Beyond this hefty
allocation, financials, basic materials, and telecoms take the
rest of the top four, suggesting a heavy tilt to traditionally
high yielding segments.
Additionally, investors should note that large caps comprise
the majority of the fund, while growth securities do account for
about 40% of assets. Still, this has proven to not be such a big
deal as the holdings are almost exclusively in a couple high
yielding sectors as low yielders like technology only account for
a small portion of the total assets in the fund.
iShares MSCI New Zealand Index Fund (
) - annual dividend of 6.9%
A nation that is often overlooked from an investment
perspective is New Zealand, as the small island country is
overshadowed by the much larger market of Australia. However, New
Zealand could still be a great pick for investors thanks to the
high yield of its main ETF, ENZL.
The product tracks the MSCI new Zealand Investable Market
Index, giving investors exposure to two dozen New Zealand firms
while charging investors 51 basis points a year in fees.
While the AUM is impressive at $100 million, trading volumes are
relatively light, although the real focus of the fund should be
the nearly 7% yield (read
The Five Minute Guide to New Zealand ETF
Much like its Belgian counterpart, this fund is heavily
concentrated in a few securities although they are in traditional
high yield segments as well. For ENZL, the focus is on telecoms,
basic materials, and consumer stocks, although industrials,
utilities and real estate all make up at least 10% of assets as
Investors should also note that Telecom Corp of New Zealand
and Fletcher building both make up over 15% of the portfolio
suggesting a heavy dependence on both of these firms. This also
gives the fund a focus on large cap blend stocks which are
well-known for their high yields, suggesting that this ETF will
probably have a high dividend focus for years to come.
iShares MSCI Spain Index Fund (
) - annual dividend of 5.9%
Although Spain might not traditionally be the location that
investors think of for high yields, EWP is a top fund for payouts
with a yield approaching six percent a year. Clearly, the fund's
incredible loss over the past one year period-down nearly 18% in
the time frame-has helped to boost the dividend yield for EWP,
but the focus on the MSCI Spain Index Fund has also assisted this
ETF in being a great yield destination.
That is because this benchmark offers exposure to just over
two dozen firms including over 40% in financials, 17% in
telecoms, and 12% in utilities. Obviously, these are some usual
hideouts for high dividend payers, and this appears to be no
different in the case of Spain (Read
Spain ETF: Here We Go Again
Furthermore, since the fund is so heavily concentrated in the
underperforming financials market, investors have likely seen
many of these securities sport truly impressive payouts, although
it should be noted that if the market turns around these yields
will probably decline back to more normal levels.
Nevertheless, the fund is easily the most popular and liquid
fund of the three on the list with over $185 million in AUM and
more than half a million in shares changing hands every day. The
expense ratio on this fund is also in line with others on the
list coming at 52 basis points a year.
Clearly, all three of these products are relatively unloved by
U.S. investors despite the ongoing search for yield. Any of the
three-while they each have their own risks-could make for
interesting choices for yield starved investors, and especially
for those seeking some more international diversification in this
uncertain market climate, while still tapping into a broad market
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Author is long ENZL.
ISHARS-MSCI NZ (ENZL): ETF Research Reports
ISHARS-BELGIUM (EWK): ETF Research Reports
ISHARS-SPAIN (EWP): ETF Research Reports
SPDR-SP DIV ETF (SDY): ETF Research Reports
VANGD-DIV APPRC (VIG): ETF Research Reports
VANGD-HI DV YLD (VYM): ETF Research Reports
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