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International Dividend ETFs: A Fiscal Cliff Survival Tool?


An ominous tone set by the fiscal cliff has grown louder since Election Day.

DOO's 30-day SEC yield of 4.77% is certainly alluring, but the primary risk to this ETF is its large weight (over 45%) to eurozone nations. Still, select European equities are attractively valued and many of DOO's Europe-based constituents derive sizable portions of their revenue from other parts of the globe.

WisdomTree Emerging Markets Equity Income Fund (NYSEARCA:DEM): Emerging markets firms are upping their dividend game this year with the expect payouts from the 300 largest non-bank stocks in the MSCI Emerging Markets Index expected to rise to $52.2 billion $48.9 billion last year.

High profitability and low corporate debt bolster the case for emerging markets dividend payers and ETFs such as DEM. So does the fact US dividend tax policy likely will not factor prominently in the decision of a Polish or Thai company's dividend decisions.

There is another reason DEM could work as a fiscal cliff play: State-owned enterprises. As in some state-owned firms are already decent dividend payers, but since their largest shareholders (the home government) often want more money, there is the potential for dividend growth.

Along those lines, investors should also evaluate the EGShares Low Volatility Emerging Markets Dividend ETF (NYSE: HILO). Both DEM and HILO offer ample exposure to various state-controlled firms.

Global X SuperDividend ETF (NYSEARCA:SDIV): The Global X SuperDividend ETF does devote about 29.3% of its weight to US equities, but many of those are real estate investment trusts that are obligated by law to payout a certain percentage of their profits in the form of dividends. That might not be enough to assuage some investors that SDIV is immune from the fiscal cliff.

Still, SDIV features plenty of positive traits and those traits extend beyond a 7.72 30-day SEC yield and a monthly dividend. SDIV is diverse and less volatile than other international dividend funds. With a price-to-earnings ratio of less than 12 and a price-to-book ratio of 1.14, SDIV is not richly valued.

And while SDIV offers exposure to both developed and developing markets, its eurozone exposure is not significant to be a major cause for concern. SDIV's recent pullback seems appears to be a case of too much too fast and below $21, the ETF is a steal.

Editor's Note: This content was originally published on by The ETF Professor.

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