International Dividend ETF Notches Impressive Rally

Summary

International stocks provide attractive dividend opportunities.

An international dividend ETF that has been strengthening this year.

Why investors should consider international dividend stocks.

By Todd Shriber & Tom Lydon

In a market permeated by risk-off sentiment, it is not surprising to see scores of dividend exchange traded funds making new all-time highs. Notable is the fact that international payout funds dot the daily list of ETFs at new all-time highs.

Among the recent members of the new all-time high club is the FlexShares International Quality Dividend Index Fund (NYSEARCA:IQDF). Year-to-date, IQDF is higher by 7.1% and flows data indicate investors are embracing the advantages of global dividend payers in their income portfolios.

IQDF is just 13 months and already has $169.5 million in assets under management. More impressive is that $77.4 million, or 45.6%, of IQDF's current AUM total has flowed into the ETF just this year.

How IQDF goes about its business is not complex. The ETF is a smart beta fund that focuses on fundamental factors, such as profitability, solid management and reliable cash flow. After all, profitability and free cash flow generation are vital tells regarding a company's ability to continue paying and raising dividends.

Japan is IQDF's second-largest country weight with an allocation of 11.7%. Although the world's third-largest economy has previously sported lower yields than other developed markets and not been a dividend destination on par with the U.S. or U.K., a weaker yen is helping facilitate dividend growth there.

The U.K., IQDF's largest country weight, and Australia combine for nearly a quarter of the ETF's weight. That bolsters the bull case for IQDF when considering Australian dividends are expected to grow this year after firms there paid $40.3 billion in dividends last year.

U.K. dividend growth has been impressive as well. According to the Independent:

British listed companies paid $102. 1 billion in dividends last year, and since 2009 have paid roughly $441 billion.

The U.K. and Australia are among the primary drivers of IQDF's weighted average dividend yield of 5.29%. Cementing IQDF's status as an ETF that is right for the current market environment is an almost 54% tilt to value stocks.

With a weighted average market value of $44.2 billion, IQDF is a decidedly large-cap fund. Although no stock accounts for more than 3% of the ETF's weight, IQDF's top-10 lineup includes some familiar international dividend names.

Takeover target AstraZeneca (NYSE:AZN) is the ETF's third-largest holding while Total (NYSE:TOT), Royal Dutch Shell (NYSE:RDS.B) and Eni (NYSE:E) are the fund's fifth- through seventh-largest holdings. That is a plus given the recent out-performance delivered by global oil stocks.

FlexShares International Quality Dividend Index Fund

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.