Spain's Banco Santander ( SAN) is one of the financial stocks in IDOG. SAN yields 12%, but the stock is down 26% since its January high, far worse than the 15% decline for the iShares MSCI Spain ETF ( EWP). IDOG holding France Telecom ( FTE) (with a 10% yield) is down 21% from its January peak compared to a 3% decline for the iShares MSCI France ETF ( EWQ). Even though those are just examples and not every stock in the fund has that kind of yield, there comes a point in dividend investing where a yield can be too high.
A very high yield can often be an indication of a distressed company that might soon cut its dividend. A strategy of buying distressed companies in hopes of a turnaround is valid. but it might not be what a person looking at dividend ETFs has in mind. The dividend dog theory is sound, but if equity markets in Europe and Japan continue to struggle, then it is unlikely that IDOG can do well. At the time of publication, Nusbaum had no positions in stocks mentioned.Follow @randomrogerThis article is commentary by an independent contributor, separate from TheStreet's regular news coverage.