Dividend investing is an essential strategy for retirees seeking steady income and portfolio growth. But, after the Federal Reserve’s recent 0.5% rate cut, today’s attractive dividend yields are likely to fall in step with bond yields.
These domestic headwinds present an opportunity for investors to broaden their horizons. With interest rates remaining elevated in many countries worldwide, global markets are fertile hunting grounds for high-yield dividend stocks.
In this article, we’ll make a case for global diversification when it comes to dividends and look at JPMorgan’s newly launched actively managed JPMorgan Dividend Leaders ETF (JDIV).
Why Global Dividends?
U.S. investors hunting for yield might do well to pack their passports. While Uncle Sam’s backyard has long been the go-to playground for investors, casting a wider net reveals a world of new opportunities in today’s market. It turns out that the United States, for all its economic might, offers relatively modest dividend yields.
Consider the numbers:
U.S. dividend yields are lower than many other countries around the world. Source: Siblis Research Ltd
The U.K., Canada, and Australia, among others, offer dividend yields that significantly outpace their American counterparts. Diversifying across borders also helps ensure the safety of these dividend yields since a rate cut or crisis in one country won’t necessarily impact the prices or yields of stocks in another.
Valuation is another compelling argument for global dividend investing. The average price-earnings ratio of U.S. companies stands at about 25.8x compared to 16x in the U.K., 19x in Canada, and 21x in Australia. While the strong U.S. economy might command a premium, there’s little doubt that its stocks are more expensive even accounting for growth.
Of course, global investing is not without its risks. Currency fluctuations can impact the dollar value of dividends received while geo-political risks may be higher in some emerging markets than in the United States. That said, the inverse is also true: A weakening dollar could amplify returns from foreign investments and help diversify your portfolio.
JPMorgan’s New Active ETF
International investing can be a challenge — especially when investing on local exchanges. That’s why most investors prefer to leverage mutual funds or exchange-traded funds (ETFs) to gain exposure to these markets. These fund managers can also help investors navigate the complexities of foreign economies and markets.
JPMorgan recently launched the JPMorgan Dividend Leaders ETF (JDIV) to provide global diversification to income-focused investors. The new fund invests in a core portfolio of global stocks with higher and faster- growing dividend yields than the MSCI All Country World Index (AWCI), including companies in both developed and emerging markets.
Unlike many dividend ETFs, the actively managed fund has the flexibility to leverage insights from a global team of fundamental research analysts to fine-tune exposure to specific countries and sectors within them. According to Morningstar data, active managers offer more value in international markets than domestic ones.
Currently, the ETF holds a portfolio of 75 companies concentrated in information technology (19.5%) and financials (18.4%) along with healthcare (11.5%), consumer discretionary (10.6%) and industrials (10.3%). And while more than half of its portfolio consists of U.S. stocks, it has 27% exposure to the EMEA and about 15% to Asia.
Finally, with its 0.47% management fee, the active fund is cheaper than most mutual funds and on par with some of its passively managed peers.
Alternatives to Consider
JPMorgan’s new ETF is hardly the only option when it comes to global dividends. From cheap passively managed funds to niche actively managed ones, you have several options when choosing the right fit for your portfolio.
Global Dividend ETFs
These funds are sorted by their YTD total return, which ranges from 10% to 16%. They have AUM between $9M and $2B, while their expenses run between 0.40% and 0.60%. They are currently yielding between 2.4% and 10%.
| Name | Ticker | Type | Active? | AUM | YTD Total Ret (%) | Yield | Expense |
|---|---|---|---|---|---|---|---|
| WisdomTree Global High Dividend Fund | DEW | ETF | No | $110M | 15.6% | 4% | 0.58% |
| SPDR S&P Global Dividend ETF | WDIV | ETF | No | $205M | 13.7% | 3.7% | 0.4% |
| Global X SuperDividend ETF | SDIV | ETF | No | $761M | 12.9% | 9.9% | 0.58% |
| First Trust Dow Jones Global Select Dividend Index Fund | FGD | ETF | No | $522M | 12.1% | 6% | 0.56% |
| Virtus WMC International Dividend ETF | VWID | ETF | Yes | $9.5M | 10.3% | 2.4% | 0.49% |
| Pacer Global Cash Cows Dividend ETF | GCOW | ETF | No | $1.98B | 10.2% | 3.5% | 0.6% |
The Bottom Line
As U.S. interest rates trend downward, global dividend investing offers a compelling alternative for income-seeking investors. The higher yields and attractive valuations found in international markets presents an opportunity that shouldn’t be overlooked.
JPMorgan’s new Dividend Leaders ETF (JDIV) provides a professionally managed avenue to tap into these global dividend streams, offering a blend of higher yields and the potential for faster dividend growth. If you’re looking for a more established fund, there are plenty of options to choose from in today’s ETF landscape.