Which International Income ETF To Buy?

One of the areas that I am looking to increase my allocation in is the international arena. As described in an earlier article "International ETF Dividend Investing", I planned to add an international ETF to my Income ETF portfolio to help accelerate my international exposure. On a preliminary basis, I identified the following candidates (information from Morningstar and yields as of 7/11/08):

WisdomTree Europe Div Fund (DEB) - 2.51% Yield (Annual)
Expense Ratio: 0.48%
Premium/Discount: 0.32%
Inception: 06-16-06
Financial Services: 29.2%
U.S.: 0%
Rejected For: Annual dividend (not frequent enough)

WisdomTree DEFA Div Fund (DWM) - 1.51% Current Yield (Annual)
Expense Ratio: 0.48%
Premium/Discount: 0.73%
Inception: 06-16-06
Financial Services: 28.61%
U.S.: 0%
Rejected For: Annual dividend (not frequent enough)

SPDR S&P International Dividend (DWX) - n/a% Current Yield (Quarterly)
Expense Ratio: na%
Premium/Discount: 0.60%
Inception: 02-12-08
Financial Services: 18.61%
U.S.: 0%
Rejected For: Insufficient information (new fund)

IShares Dow Jones EPAC Slct Dvdnd IndxFd (IDV) - 8.08% Yield (Quarterly)
Expense Ratio: 0.50%
Premium/Discount: -0.07%
Inception: 06-11-07
Financial Services: 50.70%
U.S.: 1.7%
Rejected For: Insufficient track record (new fund)

First Trst DJ STOXX Slct Dvdnd 30Indx Fd (FDD) - na% Yield (Quarterly)
Expense Ratio: 0.60%
Premium/Discount: na%
Inception: 08-27-07
Financial Services: 50.17%
U.S.: 0.0%
Rejected For: Insufficient information (new fund)

PowerShares Intnl Dividend Achievers Ptf (PID) - 4.05% Yield (Quarterly)
Expense Ratio: 0.58%
Premium/Discount: -1.12%
Inception: 09-15-05
Financial Services: 34.18%
U.S.: 6.2%
A candidate for additional consideration

Since writing "International ETF Dividend Investing", I identified the following closed-end fund for evaluation:

Eaton Vance Tax-Advantaged Glbl Div Opp (ETO) - 6.96% Yield (Monthly)
Expense Ratio: 1.06%
Premium/Discount: -12.00%
Inception: 04-24-04
Financial Services: 16.74%
U.S.: 36.5%
A candidate for additional consideration

Looking at PID's and ETO's strengths and weaknesses:

PID

• Strengths: Reasonable expense ratio, selling at a slight discount, one of the older funds, low US %
• Weaknesses: High financial services %

ETO

• Strengths: Lower financial services %, selling at a significant discount, the oldest funds considered,
• Weaknesses: Higher expense ratio, selling at a significant discount,high US %

For ETO, I listed "selling at a significant discount" as both a strength and weakness. It is good to buy something at $0.88 on the dollar, unless it is only worth $0.70 per dollar. The discount is so high it makes me believe the fund is holding some illiquid assets. I am attracted by its lower financial services % and longer track record. Its high U.S. holdings are a disappointment.

PID is almost an inverse image. It is trading at a reasonable discount with a low expense ratio and U.S. holdings. Its higher financial services are a disappointment.

Historically over their common life, ETO has out-performed PID, but experienced higher volatility. So what's a guy to do? I took a lesson from my wife and bought them both. Together, they will offset some of the other's weaknesses. I will also continue to monitor some of the more interesting ETFs above.

Disclosure: At the time of this writing I owned ETO and PID.

Comments

[Dave M.:]

""The discount is so high it makes me believe the fund is holding some illiquid assets.""

You think that 12% discount is high? In CEF land, that's not very high. And I'm amused that you think the fund is holding illiquid assets just because you think the discount is high.

2008 Jul 17 09:50 AM

[John Pseudonym:]

The ETO chart looks promising, but I would not buy until it bounces off of $25, retests and closes above $25.

At that point we could have a nice upward run in the making.

2008 Jul 17 10:17 AM

[omooc:]

Would tax considerations be extremely complex?

2008 Jul 17 07:32 PM