New Global Select Dividend Index Fund Screens Candidates Strictly

Investors looking for incomes from diversified international equities have one more option to from which to choose.

Early last week, First Trust launched a new global dividend ETF, the Dow Jones Global Select Dividend Index Fund (FGD), joining other international dividend-paying ETFs. The fund started trading on November 27th under ticker symbol FGD. The underlying index of FGD is the Dow Jones Global Select Dividend Index [PDF], which is defined by component companies of the 24 developed-market country indexes in the Dow Jones Global Indexes [DJGI] family.

The index applies strict dividend standards to companies hoping to join. Particularly, to be eligible for inclusion, according to the index’s screening procedure, a company must:

• Pay a current dividend.
• Have a current-year dividend-per-share ratio that is greater than or equal to its five-year average annual dividend-per-share ratio.
• Have a five-year average payout ratio of less than or equal to 60% for U.S. and European companies; or less than or equal to 80% for all other countries.
• Have a minimum three-month daily average trading volume of $3 million.

Currently, FGD holds top 100 dividend-paying stocks, all members of the Dow Jones Global Select Dividend Index [DJGSDT]. Companies in the index are weighted by their annual dividend yields, with an upper limit of 10% to prevent the index from being dominated by a single high-yield stock. The fund’s country breakdown is as following:

• Australia: 28.41%
• Great Britain: 22.14%
• United States: 20.08%
• Canada: 8.01%
• Singapore: 5.27%
• Hong Kong: 4.03%
• Italy: 3.39%
• Netherlands: 2.11%
• New Zealand: 1.89%
• Finland: 1.37%
• France: 1.18%
• Other: 2.12%

FGD has an expense ratio of 0.60% and dividend yield 4.95%, which is quite high compared to other dividend ETFs. Dividends are distributed on a quarterly basis and the index is rebalanced once a year in December.