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Income Investors Get More Bang From Overseas Dividend ETFs Than U.S.

Moving farther down the relative valuation spectrum is the WisdomTree Emerging Markets Equity Income Fund (DEM). DEM has nearly $3.9 billion invested in 315 dividend-paying stocks of emerging market countries such as Russia, China, and Taiwan. This ETF is also dividend weighted and holdings must meet liquidity and market capitalization requirements.

Emerging markets have vastly underperformed domestic and developed country peers over the last several years, which may make them attractive for a reflation comeback. The financial and energy sectors make up the bulk of the underlying companies in DEM and the current yield is listed at 4.20%.

One thing to note with international equities is the quarterly dividends often experience peaks and valleys throughout the year. This lumpy income stream is due to companies distributing special dividends and fiscal year-end distributions that may not coincide with the relatively steady pace of domestic stocks.

Keep in mind, this can also lead to misguided metrics when comparing the varying yield statistics which is why you should carefully research the dividend histories of these ETFs.

Investing in international markets can be an excellent way to diversify your equity income portfolio and offers the potential for enhanced returns as well. While I don't recommend abandoning U.S. dividend-paying ETFs, you may want to consider complementing those holdings with select international positions.

In addition, with the recent return of global equity volatility, newcomers to these themes would be well served to implement a stop loss or sell discipline to limit downside risk.

At the time of publication the author had a position in IDV.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

>>Read more: Cramer: Weep for the Earnings Growers, Too

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