A Reason To Say Oui To The France ETF

France is the Eurozone's second-largest economy behind Germany, but the iShares MSCI France ETF (NYSE:EWQ) doesn't command headlines and investors' attention on par with other single-country Europe exchange traded funds.

Perhaps the largest ETF dedicated to tracking French stocks should be getting more attention. In a year in which ETFs tracking the PIIGS economies are struggling, EWQ has been solid. The France ETF's 2.7 percent year-to-date gain is slightly ahead of the comparable Germany ETF and more than twice as good as the Vanguard FTSE Europe ETF (NYSE:VGK).

EWQ offers another perk: A tidy-by-comparison dividend yield. The France ETF's trailing 12-month dividend yield 2.94 percent is nearly 95 basis points better than comparable yield on the S&P 500 and looks downright tempting when considering the negative yields on Eurozone debt. Importantly, French dividends are growing.

2016 is shaping up to be another strong year for French income investors as the aggregate dividends paid by the CAC 40 over FY 2016 is set to rise by 6% compared to the previous year. This strong rise means that ordinary dividends payments made by the countrys large cap stocks will rise above the 45bn mark, according to Markit.

The $297.2 million EWQ tracks the MSCI France Index, not the CAC 40, but many of the blue chip large caps that reside in the benchmark French equity index also reside in EWQ, including New York-listed names such as oil giant Total SA (NYSE:SA) and pharmaceuticals maker Sanofi SA (NYSE:SNY). Those are EWQ's top two holdings, combining for 16 percent of the ETF's weight.

Interestingly, French dividends are growing even as the major banks there keep payouts flat this year.

All three CAC constituent banks, BNP, Societe Generale and Credit Agricole all boosted their payments by over 50% in the last fiscal year, but the current low interest environment and coupled with new capital constraints means that all three firms are forecasted to pay flat dividends in the FY 2016, notes Markit.

Financials are EWQ's third-largest sector allocation behind industrial and consumer discretionary names. BNP, Societe Generale and Credit Agricole combine for about 7.6 percent of the ETF's weight with only BNP being a top 10 holding in the fund.

Automotive names such as Michelin, Renault and Valeo are leading French dividend growth. That trio combines for four percent of EWQ's lineup.