Selecting The Better Individual Dividend Performers From WisdomTree Global Ex-U.S. Utilities ETF

 |  Includes: DBU, IPU, JXI, XLU
by: Richard Shaw

Utilities have a role to play within conservative dividend oriented portfolios. International utilities may have a role within the utilities allocation.

International utilities moved up more than U.S. utilities after the March 2009 stock market low, took a bigger dive in the 2010 flash crash period,and then got back in step with U.S. utilities until April 2011. At that time U.S. and international utilities diverged and have stayed that way over the past year.

As a consequence international utilities may represent a better total return opportunity when they turn around that the U.S., because utilities are generally thought of as extended at this time.

This chart of the S&P 500 utility sector ETF (NYSEARCA:XLU) [yield 3.96%] and two international and one global utility ETFs shows the divergence clearly.

The international and global ETFs are:

  • DBU (WisdomTree Global ex-U.S. Utilities) [yield 4.91%]
  • JXI (S&P Global Utilities) [yield 4.60%]
  • IPU (S&P International Utilities) [yield 4.52%]

Click to enlarge

The yields are higher for the global and international utility funds, but what about the quality of the dividends, in terms of consistency and growth?

We reviewed combination price, earnings and dividend charts for all of the stocks in the WisdomTree Global ex-U.S Utilities ETF and were disappointed to find so few with appealing performance, and so many with awful performance.

Of the 89 stocks in the fund, there were only 8 that might have some appeal in terms of dividend growth and consistency. After additional fundamental research, probably even fewer would appeal.

The remaining 81 stocks, had unappealing price / earnings / dividend charts.

We did not review the charts for the holdings of JXI or IPU.

Unless you are interested in a recovery story, the price / earnings / dividend charts for individual holdings of DBU suggest it is not a good choice for a retirement account seeking income growth. There may be long-term thematic arguments for the stocks, and a solid price recovery at some point is possible, but to the extent that consistent dividend performance is a factor in your decision, DBU does not hold enough stocks that fit the bill.

Note that this was a charts only review, and did not include any other factors. There is more to consider, but if the chart view fails, there is little reason to look further, unless you have some specific idea in mind.

Since the large batch of utilities do not make a good dividend showing, we would be more inclined to purchase individual stocks than to own the lot of them through a fund.

Most of the stocks in DBU can be purchased in the local market through a major broker global desk (which is typically best for liquidity), or through an ADR in the U.S. markets (although we generally recommend against pink sheets purchases).

Here is the best of the bunch:

Business Descriptions:

Along with the descriptions, we provide market country, local market symbols, most recent yield and the Wright's rating for liquidity, financial strength, profitability and growth (liquidity measured on local market). The ratings are alpha "A-D", except for growth rated 1-20.

Red Electrica
(Spain, symbol: REE, yield 6.89%, rating ACA 16)

Red Electrica Corporacion SA is a Spain-based company primarily engaged, through its subsidiaries and affiliates, in the energy sector. The Company specializes in the transmission of electric energy, as well as in the operation of electric systems. The Company manages the Spanish high-voltage transmission grid and is responsible for its development, maintenance and improvement of the network's installations. The Company's activities also include the coordination between the generation, transmission and distribution of electric energy.

(Canada, symbol: EMA, yield 3.93%, rating ACC6)

Emera Incorporated is an energy and services company. The Company invests in electricity generation, transmission and distribution, gas transmission and utility energy services. As of December 31, 2011, its subsidiaries include Nova Scotia Power Inc., an integrated electric utility and the primary electricity supplier in Nova Scotia; Bangor Hydro Electric Company and Maine Public Service Company, (a wholly owned subsidiary of Maine and Maritimes Corporation), which together provide transmission and distribution services, and Emera Brunswick Pipeline Company Limited (Brunswick Pipeline).

Scottish and Southern Energy
(UK, symbol: SSE, yield 5.74%, rating ABA11)

SSE PLC, formerly Scottish and Southern Energy plc, is the holding company. The Company's subsidiaries are organized into the main businesses of the generation, transmission, distribution and supply of electricity; the production, storage, distribution and supply of gas, and the provision of other energy-related services. The Company's operating segments include the distribution and transmission of electricity in the North of Scotland, the distribution of electricity in the South of England (together referred to as Power Systems), and the generation and supply of electricity and sale of gas in Great Britain and Ireland (Generation and Supply) and other businesses. In addition to this the Company's 50% interest in Scotia Gas Networks Limited, a business which distributes gas in Scotland and the South of England.

Canadian Utilities
(Canada, symbol: CU, yield 2.54%, rating ABB7)

Canadian Utilities Limited is a holding company. The Company operates in four segments: Utilities includes the regulated distribution of natural gas by ATCO Gas, , and the regulated distribution and transmission of electricity by ATCO Electric and its subsidiaries, Northland Utilities, Northland Utilities and Yukon Electrical; Energy includes the non-regulated supply of electricity and cogeneration steam by ATCO Power, and the non-regulated natural gas gathering, processing, storage, and natural gas liquids extraction by ATCO Midstream; ATCO Australia includes the non-regulated supply of electricity and cogeneration steam by ATCO Power Australia, and as of July 29, 2011, the regulated distribution of natural gas by ATCO Gas Australia and the development, operation and support of information systems and technologies by ATCO I-Tek Australia, and Corporate and Other includes its investment in ATCO Structures & Logistics.

Hong Kong and China Gas Company
(Hong Kong, symbol: 3, yield 1.73%, rating AAB7)

The Hong Kong and China Gas Company Limited (Towngas) is engaged in the production, distribution and marketing of gas, water and energy related activities in Hong Kong and mainland China. The Company is also engaged in property development and investment activities in Hong Kong. During the year ended December 31, 2010, the Company launched nine new projects. During 2010, Towngas China Company Limited (Towngas China) acquired eight new projects located in the New Industrial District of Anshan, Dalian Lvshun Economic Development Zone, Kazuo county of Chaoyang in Liaoning province; in the Lingui New District of Guilin in Guangxi Zhuang Autonomous Region; in the Nanhai New District of Laiyang and Linqu county of Weifang in Shandong province; and in the Chengdong Harbour District of Jiujiang and the Fubei Industrial Park of Fuzhou in Jiangxi province.

(Canada, symbol: ACO X, yield 1.76%, rating BBA9)

ATCO Ltd. is engaged in structures and logistics, utilities, energy and technologies. The Structures & Logistics segment includes the manufacture, sale and lease of transportable workforce housing and space rentals products. The Utilities segment includes the distribution of natural gas by ATCO Gas, the transmission of natural gas by ATCO Pipelines, and the distribution and transmission of electricity by ATCO Electric and its subsidiaries. The Energy segment includes the supply of electricity and cogeneration steam by ATCO Power and the supply of electricity by ATCO Power, and the natural gas gathering by ATCO Midstream. The ATCO Australia segment includes the supply of electricity and cogeneration steam by ATCO Power Australia. The Corporate and Other segment includes the development, operation and support of information systems and technologies.

(Spain, symbol: ENG, yield 10.0% rating ABA12)

Enagas SA is a Spain-based company primarily engaged in the transport and underground storage of natural gas, as well as in the regasification of natural gas to the National Pipeline Network. The Company operates a network of more than 9,000 kilometers of high-pressure gas pipelines located in the Spanish territory that have international connections with France, Portugal and Morocco. Its facilities also include three regasification plants operating in Barcelona, Cartagena and Huelva, and two underground natural gas storage units established in Huesca and Biscay. In addition, the Company offers such services as offloading liquefied natural gas from ships to regasification terminals; LNG, carbon dioxide, hydrogen and biogas tank loading; development of direct gas pipelines; laboratory certification services and other services related to infrastructure.

Guandong Investment
(Hong Kong, symbol 270, yield 3.32%, rating BAB8)

Guangdong Investment Limited is engaged in investment holding, property holding and investment, investing in infrastructure and energy projects, water supply to Hong Kong and Shenzhen and Dongguan, hotel ownership and operations, hotel management and department stores operations. It has seven segments: property investment and development segment; toll roads and bridges segment; water distribution segment; electric power generation segment; hotel operations and management segment; department stores segment, and others segment. On January 4, 2010, the Company acquired Golden River Chain Limited (Golden River). Its subsidiaries include Global Head Developments Limited, Fill Success Investments Limited, GH Water Supply (Holdings) Limited, Guangdong Hotel Limited and Guangdong Properties Holdings Limited.

Disclosure: QVM has positions in XLU as of the creation date of this article (April 25, 2012).

General Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions. This article is presented subject to our full disclaimer found on the QVM site available here.

Extra Risk on Non-U.S. Exchanges: If securities on non-U.S. exchanges were identified, this disclaimer applies to those securities.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: Disclosure: QVM has positions in XLU as of the creation date of this article (April 25, 2012).