Trading might be difficult in the world market this year, but this hasn’t deterred ETF sponsors from launching new products. In fact, a flurry of funds hit the market in the recent past, suggesting a long line-up of fund ideas.
Thanks to the changing dynamics in the world market, sponsors also need to look for some promising zones which are performing better with no sign of deterioration looming large on the horizon, even in the ongoing global economic doldrums. Such an idea is dividend investing in Europe and international markets.
Realizing the trend, WisdomTree rolled out two dividend ETFs – WisdomTree Europe Dividend Growth Fund – EUDG and WisdomTree International Hedged Dividend Growth Fund – IHDG on May 7, 2014. Investors should note that WisdomTree has already seen a great level of success in the dividend investing arena with products targeted at various markets like the U.S. and other developed nations, and it is no doubt looking for similar asset accumulation for the products described below:
EUDG in Focus
The product looks to follow the WisdomTree Europe Dividend Growth Index, a benchmark that consists of about 300 companies that have a market cap of at least $1 billion. These 300 stocks are screened on a combined basis of growth and quality factors in order to give a comprehensive approach to dividend investing.
Growth factors like long-term earnings growth expectations and quality factors like return on equity, and return on assets are the criteria looked upon while including the stocks to build up the index. Additionally, it is worth noting that the ETF is dividend weighted. Payout of no less than $5 million in cash dividends annually prior to the index screening will be considered for inclusion.
Currently the index is tilted toward the United Kingdom (25%), Switzerland (22%) and Germany (16%) while other nations like France, Norway, Sweden and the Netherlands also have their share. At the time of the Index’s annual rebalancing, no single stock could exceed the weight of about 5% of the basket while the cap for the sector is pegged at about 20%. The fund charges 58 bps in fees.
At present, blue-chip companies like Novartis AG (5.84%), Nestle SA (5.75%) and Roche Holding AG (4.25%) are the top three holdings of the ETF. About 35% of its assets go to the top-10 holdings.
Top sector of the fund is consumer staples (20.2%) (known for its defensive status), followed by healthcare (17%) and consumer discretionary (16%). Sector-wise the fund adopts a well-diversified approach (read: Hot Euro Zone ETFs for Summer).
IHDG in Focus
The new ETF follows the WisdomTree International Hedged Dividend Growth Index. This benchmark consists of about 300 companies that have a market cap of at least $1 billion. Here also, the stocks are screened based on the aforementioned growth and quality factors. The index includes companies paying cash dividends regularly. The fund charges 58 bps in fees.
Per the regulatory filing, the index is targeted at 15 developed Europeancountries (Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, or the United Kingdom) as well as Israel, Japan, Australia, New Zealand, Hong Kong or Singapore, though at present the index heavy on the United Kingdom (20.2%), Switzerland (16.2%) and Australia (15%).
Here also, consumer staples rule the fund with 20% exposure trailed by consumer discretionary (19.6%) and healthcare (16%). The companies including Roche Holding AG (5.8%), BHP Billiton Ltd (5.7%) and Nestle SA (5.21%) round out the top three spots of the ETF.