When it comes to individual countries and dividends, the United States is the undisputed leader. Outside the United States, the U.K. is probably the first country that comes to many investors' minds regarding dividends and dependable payout growth.
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With so many ex-U.S. developed markets implementing negative interest rates and more than $10 trillion worth of negative-yielding floating around the developed world, yield is increasingly hard to come by. Those factors and others increase the allure of New Zealand and the Shares MSCI New Zealand Capped ETF (iShares Trust (ENZL)) as credible dividend destinations.
Look Toward New Zealand
ENZL has also recently been making a series of all-time highs, a trend that may continue following another interest rate reduction courtesy of the Reserve Bank of New Zealand (RBNZ). Last month, RBNZ said it cut New Zealand's benchmark lending rate by 25 basis points to an all-time low of 2 percent. Interest rates as low as 2 percent are news in New Zealand, but that is still much higher than what investors will find in the United States, the U.K., the eurozone and Japan.
An interesting fact that many U.S. investors may not be aware of is New Zealand's enviable perch as an unsung dividend leader.
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New Zealand companies pay out more profits as dividends than any other country in the world, with an aggregate distribution of 84 percent of earnings in 2015, much higher than the 48 percent in the U.S. and 54 percent globally, according to S&P Dow Jones Indices.
Envy For The ENZL
S&P Dow Jones Indices issues New Zealand's benchmark S&P/NZX 50 Index as well as the S&P/NZX 50 High Dividend Index. ENZL, the lone U.S.-listed ETF dedicated to New Zealand stocks, tracks the MSCI New Zealand IMI 25/50 Index. The $176.6 million ETF is home to 28 stocks.
Although interest rates have been steadily falling in New Zealand, ENZL's trailing 12-month dividend yield is 2.6 percent, or 54 basis points higher than the comparable yield on the S&P 500. Dividend yields decline when equity prices rise and that is indeed the case with ENZL this year. The ETF is up 24.1 percent including paid dividends, or more than quadruple the returns offered by the comparable Australia ETF.
One primary reason for this high payout ratio may be New Zealands dividend imputation regime, a rarity among countries around the world. The imputation policy boosts total return by promoting a good corporate dividend payout policy. More than 80 percent of New Zealand corporations surveyed by Ernst & Young in 2014 listed 'meeting dividend payout target' as a leading driver of dividend policy, added S&P Dow Jones Indices.
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