A German ETF For A Euro Decline


Some folks believe the euro is overvalued. The International Monetary Fund said as much in April.

Eurozone exporters have been claiming about the strong currency for months now. Last week, the common currency hit a six-month high against the dollar. The CurrencyShares Euro Trust (NYSE:FXE) is up three percent in the past 90 days.

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The strong euro has been particularly problematic for export-dependent Germany, the Eurozone's largest economy. Already grappling with the effects of the weak yen, German equities and ETFs are not helped by a strengthening euro. Over the past three months, the Vanguard FTSE Europe ETF (NYSE:VGK) has traded slightly higher, but the iShares MSCI Germany ETF (NYSE:EWG) has traded slightly lower.

Related: Three ETFs That Could Suffer From A Weak Yen.

While Europe ETFs have been recovering, the veracity of that recovery could be questioned if the euro keeps its perch among the better-performing developed market currencies. However, if the European Central Bank can push the euro lower, there are a few unheralded ETFs that should benefit, including one specific to Germany.

The db X-trackers MSCI Germany Hedged Equity Fund (NYSE:DBGR) is that play. In a year when currency hedged ETFs have emerged as a popular way to gain to access to Japanese stocks, investors may be forgetting there are hedged plays for currencies beyond the yen.

DBGR tracks the MSCI Germany U.S. Dollar Hedged Index, which is "designed to provide exposure to German equity markets, while at the same time mitigating exposure to fluctuations between the value of the U.S. dollar and the Euro," according to Deutsche Bank.

In terms of holdings, DBGR holds many of the familiar, large-cap German stocks that are found in the rival EWG. That group includes SAP (NYSE:SAP), Siemens (NYSE:SI) and Deutsche Bank (NYSE:DB). Materials is DBGR's largest sector at 24 percent. Consumer discretionary and financial services names combine for another 36.6 percent.

Like the other hedged currency ETFs sponsored by Deutsche Bank, DBGR can be traded commission-free by investors with E*Trade accounts.

However, that is not the only nifty feature DBGR has to offer. As of the end of June, the MSCI Germany U.S. Dollar Hedged Index had a dividend yield of 3.38 percent. The ETF made a distribution of nearly 85 cents a share in July, according to issuer data.

Assuming the dividend is paid just once a year, that still gives DBGR a solid 3.8 percent dividend yield based on the fund currently trading around $22. The trailing 12-month yield on EWG is 1.65 percent.

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Disclosure: Author does not own any of the securities mentioned here.

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