The Best International Sectors Based upon Dividend Trends

Paul Amery writing for Index Universe wrote a fascinating piece on dividend trends in European markets. In fact, those dividend trends likely mirror changes in company distributions clear across developed market segments.

Some findings come as no surprise; that is, the once lofty expectation for 7%-8% yield from European banks has been cut by half. (And that's not saying anything about the extreme depreciation of bank shares over the last 3 years.)

DJ Stoxx 600 Approximate Dividend Payouts By Sector
				June '06	Sep '08	June '09
International Energy				4.0%	4.5%	5.0%
International Utilities				3.5%	5.0%	5.0%
International Technology				1.8%	2.5%	2.0%
International Consumer Goods (Excl Auto)				2.5%	3.5%	3.0%
International Telecom				5.0%	6.5%	5.7%
International Basic Materials				3.7%	3.8%	2.7%
International Healthcare				2.5%	3.0%	2.5%
International Financials (Banks)				7.5%	8.0%	3.8%

Of the 8 DJ Stoxx sectors that I identified here, only 2 provide the cherished trait of a steadily increasing payout (i.e., Oil/Gas via Energy and Utilities).

There are a number of ETFs that may capture this consistency of income. In the utilities arena, you have iShares S&P Global Utilities (IXC), SPDR International Utilities (IPU) and WisdomTree International Utilities (DBU).

There's a bit of irony worth noting, however. So far in 2009, utilities have been the worst performers of any economic segment, with capital depreciation in the double digits. In contrast, one of the least reliable sources of income has been in the basic materials arena. And yet, "materials" have the largest gains in terms of capital appreciation.

Clearly, many investors hope to balance a reliable income stream with a reasonable potential for appreciation. Telecom has been consistent with its income, but shaky on its potential for growth. Meanwhile, technology has been solid in terms of capital appreciation in 2009, yet the 2% yield may be less desirable for income seekers.

The hands-down winner over the last 3 years? "International Energy" a la oil and gas. The dividend yield has shown steady growth and is currently near 5% per year. ETFs that may capture this capital appreciation/consistent income combo include iShares S&P Global Energy (IXC), SPDR International Energy (IPW) and WisdomTree International Energy (DKA).

Full Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company may hold positions in the ETFs, mutual funds and/or index funds mentioned above.

Comments

[tinscale:]

Thanks for your posts, Gary.

I noticed a minor typo -- the correct symbol for the iShares Global Utilities ETF is JXI.

Jul 02 12:10 PM

[TradingHelp...:]

You raise a valid point re utilities but they always underperform in a sharp market rally (the March-May rally still the dominant action year-to-date).

Look at the chart via the link below for evidence stability in recent weeks. It's been solid whilst most other sectors have given back a lot of gains. It may not be exciting but you are not going to lose your shirt.

tradinghelpdesk.wordpr.../

Jul 04 02:07 PM