Xtrackers MSCI EAFE High Dividend Yield Equity ETF

HDEF

Market cap $2.22B

By investing in companies that generate durable free cash flow, investors can help dampen volatility, support total return and deliver sustainable income over the long term. Historically, dividends have been a meaningful contributor to equity returns, accounting for nearly 40% of the S&P 500's total return. Dividends can do more than provide a stream of income; investing in companies that generate free cash flow may help reduce volatility, drive total return and deliver sustainable income over the long term.

With a weakening U.S. dollar, investors who look outside the U.S. have an opportunity for enhanced total returns with international ETFs. The Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF) offers low-cost exposure to high-quality international dividend stocks.

HDEF: Solid Dividends, But Don't Expect Strong Growth

Xtrackers MSCI EAFE High Dividend Yield Equity ETF offers a 4% yield from ex-U.S. dividend stocks with above-average quality characteristics. HDEF is geographically diversified but concentrated in financials and its top 10 holdings, with moderate single-company risk. Historical performance is close to its MSCI EAFE benchmark since inception and is average among competitors.

On the latest ETF 360, VettaFi Senior Industry Analyst Kirsten Chang was joined by Head of Xtrackers Wealth, US onshore for DWS,  Aram Babikian. DWS manages over one trillion AUM across a variety of asset classes.

I track about a thousand funds using Mutual Fund Observer and have developed a ranking system to group equity funds into four categories based on risk, valuation, and/or yield. Tier One contains the Lipper Categories and funds that have a combination of lower risk, lower valuations, and higher yields. Tier Two contains those with low to moderate valuations and have lower risk.

With a flip of the switch, BlackRock ( NYSE:BLK ) recently completed the company's first mutual fund-to-ETF conversion, a move made to meet investors' insatiable thirst for active management.

The Xtrackers MSCI EAFE High Dividend Yield Equity ETF worth considering as the pendulum shifts away from the US. Overall, HDEF is diversified and has a solid yield. The sector allocation is tilted towards Financials and Consumer Staples.

Global dividends hit a record high in 2024, with $606.1 billion paid in Q2 alone, as tech giants like Meta and Alibaba entered the dividend-paying market. Equity yields remain low compared to bonds, with the FTSE All-World index yielding 1.86% in September 2024, while the FTSE World Government Bond index yield to maturity stood at 3.03%. Dividend-focused strategies can enhance income potential in equity portfolios by prioritising high-dividend-paying sectors and reducing risks of dividend cuts.

The last 12 months have been difficult for equity income investors. The top 20% of dividend-paying stocks in the S&P 500 Index have returned 13.5% in the 12 months through March.