Global Dividend Income Fund

By Todd Shriber, ETF Trends

As investors look to add international diversity to and boost the income-generating capabilities of their portfolios, global dividend stocks and exchange traded funds are receiving more attention.

While foreign dividend stocks across multiple sectors often sport higher yields than their U.S. counterparts from the same sectors, some global dividend ETFs really ratchet up the yield. The First Trust Dow Jones Global Select Dividend Index Fund (FGD) is a prime example.

FGD has a trailing 12-month yield of about 4.3%, the byproduct of a several important factors. First, the fund allocates over 37% of its combined weight to the telecom and utilities. Just as they are here in the U.S., those sectors have high-yield reputations in other developed markets.

Second, FGD devotes a combined 28% of its country weight to Australia and the U.K., two of the best ex-U.S. developed markets dividends payers. The U.S. is the ETF’s largest country weight at 16.7%. Although the U.S. is the biggest dividend-paying market in the world, the potency of mixing in Australian and British dividends should not be underestimated.

“British listed companies paid $102. 1 billion in dividends last year, and since 2009 have paid roughly $441 billion,” The Independent reported.

Although interest rates down under are low by Australia’s standards, rates there are high relative to much of the developed world, which juices the yields on the country’s stocks. Australian companies paid $40.3 billion in dividends last year, nearly double the amount paid in 2013.

FGD also offers some exposure to an improving dividend scenario in the Eurozone as France, Germany, Spain and Finland combine for about 22% of the ETF’s weight.

If there is a drawback to FGD, it is easy to spot: The large, combined weight to telecom and utilities, even if mainly of the foreign variety, implies some of level of vulnerability to rising interest rates. High-yield stocks, particularly from those sectors, are seen as sensitive to rising interest rates.

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First Trust Dow Jones Global Select Dividend Index Fund (FGD) is a component of the D2 Capital Management Multi-Asset Income Portfolio.  The portfolio's current yield is 5.18% (as of 4 June 2014).

Disclosure:  I own the D2 Capital Management Multi-Asset Income Portfolio

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association.