This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Finding Fatter Yields Abroad: SDY vs. FGD

Stocks in this article: SDYFGDIDVLVLDOODEM

NEW YORK ( TheStreet) -- Desperate for yield, investors have been pouring into dividend ETFs. A popular choice is SPDR S&P Dividend (SDY), which yields 2.9%. But you can get richer yields with foreign dividend funds. First Trust Dow Jones Global Select Dividend (FGD) yields 5.7%, while iShares Dow Jones International Select Dividend (IDV) yields 5.4%.

Foreign stocks have long yielded more than their U.S. counterparts. The gap developed over decades because Wall Street did not focus on dividends. Instead of insisting that companies use cash for dividends, many institutional investors urged corporate managements to reinvest in their businesses or buy back shares.

Foreigners had a different attitude. In Europe and the emerging markets, many companies have been dominated by founding families that preferred receiving hefty dividends.

In recent years, U.S. stocks have been increasing their dividend payouts, but they still trail foreigners by a substantial margin. While U.S. shares account for 47% of the value of global stock markets, American companies only pay 29% of all dividends, says Jeremy Schwartz, research director of Wisdom Tree Asset Management.

Besides offering extra income, international dividend funds can provide diversification because of their exposure to foreign currencies. When the dollar sinks against the euro -- as happened in recent months -- the value of foreign stocks climbs for U.S. investors.

Should income investors dump all their U.S. funds and shift to foreign ETFs? Not necessarily. If the euro collapses, the value of foreign funds could sink. Still, dividend investors have considerable reason to put at least some assets in foreign ETFs.

Among the highest yielding foreign ETFs is Guggenheim S&P Global Dividend Opportunities Index (LVL), which yields 7.8%. The fund holds 100 high-yielding companies that have increased earnings during the past three years and have reported stable or rising dividends. About two thirds of assets are in mid-cap and small stocks.

Because dividend stocks tend to be relatively stable, the Guggenheim portfolio is less volatile than many competitors that include nondividend stocks. But like many dividend funds, Guggenheim fell hard during the turmoil of 2008. Part of the problem was that banks and other financial stocks are among the biggest dividend payers. Financials account for 28% of Guggenheim's assets. As the financial crisis unfolded, bank stocks collapsed.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,390.13 +194.71 1.13%
S&P 500 0.00 -2.75 -0.14%
NASDAQ 4,630.0810 +63.9430 1.40%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs