ETF Income Investing for 2014, Part 2: Dividend Equities
One of the areas I am specifically targeting for additional exposure in 2014 is international dividend-paying stocks. A bright spot for international stocks is that they haven't had the same huge move that domestic equities experienced in 2013, which makes them more attractive from a valuation standpoint. In addition, many foreign dividend-paying equities are offering much larger yields than their domestic counterparts. Both developed and emerging market countries underperformed the U.S. in 2013 and I believe that we could see a reversal of that trend this year.
The top exchange-traded fund on my radar in this space is the iShares International Select Dividend ETF
(IDV). This ETF controls over $3 billion focused on approximately 100 companies of dividend-paying stocks in foreign developed countries. It currently has a 30-day SEC yield of 4.55%, which is over 50% higher than its domestic counterpart in the iShares Select Dividend ETF
(DVY). The top three country allocations include Australia, the U.K. and France.
Another opportunity that warrants closer attention is in the technology sector. One of my favorite equity income ETFs to access this space is through the First Trust Nasdaq Technology Dividend Index (TDIV). I like this fund because it gives you exposure to a subset of technology stocks that are focused on returning value to shareholders through cash dividends.
Many of the underlying companies in TDIV are in a more mature phase of their business cycle, which allows them to distribute earnings while still seeking long-term growth. In addition, these companies have low debt ratios and offer exposure to businesses that aren't as susceptible to interest rate risk as utilities or telecommunication stocks. The current 30-day SEC yield of TDIV is 2.59% and distributions are paid on a quarterly basis.
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