Thursday, July 17, 2008

* Which International Income ETF to Buy?

One of the areas that I am looking to increase my allocation is in the international arena. As described in an earlier article "International ETF Dividend Investing", I planned to add an international ETF to my Income ETF portfolio to help accelerate my international exposure. On a preliminary basis I identified the following candidates (information from Morningstar and yields as of 7/11/08):

WisdomTree Europe Div Fund (DEB) - 2.51% Yield (Annual)
Expense Ratio: 0.48%
Premium/Discount: 0.32%
Inception: 06-16-06
Financial Services: 29.2%
U.S.: 0%
Rejected For: Annual dividend (not frequent enough)

WisdomTree DEFA Div Fund (DWM) - 1.51% Current Yield (Annual)
Expense Ratio: 0.48%
Premium/Discount: 0.73%
Inception: 06-16-06
Financial Services: 28.61%
U.S.: 0%
Rejected For: Annual dividend (not frequent enough)

SPDR S&P International Dividend (DWX) - n/a% Current Yield (Quarterly)
Expense Ratio: na%
Premium/Discount: 0.60%
Inception: 02-12-08
Financial Services: 18.61%
U.S.: 0%
Rejected For: Insufficient information (new fund)

IShares Dow Jones EPAC Slct Dvdnd IndxFd (IDV) - 8.08% Yield (Quarterly)
Expense Ratio: 0.50%
Premium/Discount: -0.07%
Inception: 06-11-07
Financial Services: 50.70%
U.S.: 1.7%
Rejected For: Insufficient track record (new fund)

First Trst DJ STOXX Slct Dvdnd 30Indx Fd (FDD) - na% Yield (Quarterly)Expense Ratio: 0.60%
Premium/Discount: na%
Inception: 08-27-07
Financial Services: 50.17%
U.S.: 0.0%
Rejected For: Insufficient information (new fund)

PowerShares Intnl Dividend Achievers Ptf (PID) - 4.05% Yield (Quarterly)
Expense Ratio: 0.58%
Premium/Discount: -1.12%
Inception: 09-15-05
Financial Services: 34.18%
U.S.: 6.2%
A candidate for additional consideration

Since writing "International ETF Dividend Investing", I identified the following closed-end fund for evaluation:

Eaton Vance Tax-Advantaged Glbl Div Opp (ETO) - 6.96% Yield (Monthly)
Expense Ratio: 1.06%
Premium/Discount: -12.00%
Inception: 04-24-04
Financial Services: 16.74%
U.S.: 36.5%
A candidate for additional consideration

Looking at PID's and ETO's strengths and weaknesses:

  • Strengths: Reasonable expense ratio, selling at a slight discount, one of the older funds, low US %
  • Weaknesses: High financial services %
  • Strengths: Lower financial services %, selling at a significant discount, the oldest funds considered,
  • Weaknesses: Higher expense ratio, selling at a significant discount,high US %
For ETO, I listed "selling at a significant discount" as both a strength and weakness. It is good to buy something at $0.88 on the dollar, unless it is only worth $0.70 per dollar. The discount is so high it makes me believe the fund is holding some illiquid assets. I am attracted by its lower financial services % and longer track record. Its high U.S. holdings are a disappointment.

PID is almost an inverse image. It is trading at a reasonable discount with a low expense ratio and U.S. holdings. Its higher financial services are a disappointment.

Historically over their common life, ETO has out-performed PID, but experienced higher volatility. So what's a guy to do? I took a lesson from my wife and bought them both. Together, they will offset some of the other's weaknesses. I will also continue to monitor some of the more interesting ETFs above.

At the time of this writing I owned ETO and PID.

(Photo: sanja gjenero)

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