A dividend ETF goes global
With broad geographical diversification and an attractive yield, this fund is a relatively safe way to add an international element to your portfolio.
By Don Dion, TheStreet
Despite these concerns, I still believe that maintaining some exposure abroad is essential to a well-balanced portfolio.
In the past, I have highlighted Canada and China as countries investors may want to keep an eye on. While aggressive investors may find funds like the iShares MSCI Canada Index Fund (EWC) and Guggenheim China Small Cap ETF (HAO) exciting, such individual nation funds may prove to be excessively risky for a more conservative audience. For individuals looking for a safer way to add a global element to their portfolio, the PowerShares International Dividend Achievers Portfolio (PID) may be just right.
PID, like other dividend-focused ETFs, is designed to zero in on companies boasting attractive yields. However, while funds such as the iShares Dow Jones Select Dividend Index Fund (DVY) or the iShares High Dividend Equity Fund (HDV) target the U.S., PID takes a global approach to dividend investing.
Despite its name, investors turning to PID do not avoid exposure to domestic equities entirely. Rather, U.S. companies still command a respectable 6.8% of the fund's portfolio, making it the third-largest slice of the fund's geographic breakdown. Other heavily represented nations include the U.K., Canada, Mexico, Israel and Switzerland.
The fund's direct exposure to the troubled EU is relatively minimal. Spain is the largest represented member of the euro bloc, representing less than 4% of the fund's portfolio.
PID's widespread geographic exposure should prove effective in helping investors mitigate some global uncertainty. This, however, represents only one of the fund's attractive defensive qualities.
In addition to its wide global reach, PID's sector breakdown is also well suited for safely navigating shaky markets. In its searching for high-dividend-yielding equities, the fund has gained ample exposure to defensive sectors. In total, telecommunications, consumer staples, health care and utilities represent more than half of the fund's total portfolio.
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While the fund's geographic and sector breakdowns are attractive, the fund's real bread and butter can be found in its ample dividend. According to Morningstar, the fund's 12-month yield stands at 3.8%, surpassing the payout issued from competitors like DVY.
PID boasts a number of qualities that make it attractive in the current environment. It is important, however, that investors view this fund as they would any other international ETF. With this small and focused exposure, you can benefit from the fund's consistent payouts and protect against the threat of ongoing volatility in the international markets.
PID can be added to a list of tools that also includes domestic dividend-paying equities, gold, bonds and defensive currencies. Using a well-constructed combination of these asset classes, you can create a suitable shield against this bout of market turmoil.
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