Investors typically focus on U.S. stocks because they are most familiar with the market. However, people may be leaving money on the table as international equities and related exchange traded funds offer many opportunities.
International stocks offer higher dividend yields and attractive valuations.
“Still looking for yields?” Sean Adkins, Director of Asset & Wealth management at Deutsche Bank, asked ETF Trends in a call. “Overseas yields look attractive. The U.S. has high valuations while overseas yields and valuations are low.”
After a multi-year rally, the SPDR S&P 500 (NYSEArca: SPY) has produced a 16.1% average annualized return over the past five years. With the S&P 500 hovering near record highs, SPY is now trading at a price-to-earnings ratio of 19.28 and a price-to-book of 2.66.
In contrast, the Deutsche X-trackers MSCI All World ex-US High Dividend Yield Hedged Equity ETF (NYSEArca: HDAW) shows a 12.74 P/E and a 1.43 P/B.
HDAW targets companies with higher-than-average dividend yields relative to their market-cap-weighted counterparts across both developed and emerging countries, excluding the U.S. Moreover, the ETF includes a currency hedge which helps negate the negative effects of weakening foreign currencies or a strengthen dollar on overseas returns.
Along with the cheaper valuations, investors may also enjoy the higher yields. HDAW comes with a 2.43% 12-month yield, compared to the SPY’s 2.06% yield.
For even greater targeted overseas exposure, investors may consider the Deutsche X-trackers MSCI Emerging Markets High Dividend Yield Hedged Equity ETF (NYSEArca: HDEE) for exposure to the developing economies while the Deutsche X-trackers MSCI EAFE High Dividend Yield Hedged Equity ETF (NYSEArca: HDEF) tracks developed countries across Europe, Australasia and the Far East. Both ETFs hedge their currency risks as well.
HDEE shows a low 9.37 P/E and a 1.06 P/B while HDEF trades at a higher 14.69 P/E and 1.67 P/B.
The emerging market ETF has a 1.97% 12-month yield and the EAFE comes with a robust 4.23% 12-month yield.
For more information on the international markets, visit our global ETFs category.
This article was provided by our partners at ETFTrends.