Tags: Income | Emerging | Market | etf

An Income Play On Emerging Market Panic? You Bet ...

Thursday, 14 Jun 2012 01:36 PM

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When investors think about income stocks, they usually think about utilities and energy companies or, if they want long-term growth, consumer goods producers.

And that makes sense. Utilities and energy firms churn relatively high current income, while consumer goods companies pay lower now but tend to increase dividends steadily over time. Both are good calls for different situations.

They also share a single, common flaw: These strategies presume you only care to invest in U.S. stocks.

Now, a home-country bias is not a huge sin. We all share in the perspective that we should invest in what we know.

Foreign stock investing can be riskier in a number of ways. Many smaller countries’ fortunes rise and fall with commodities prices, because they export so much. Currency fluctuations can play havoc with your total return (or benefit you, possibly). Taxes are an issue.

But sometimes it’s important to consider the bigger picture. For instance, as CNBC reports, the mild panic in Asia over property values has led to a value environment unlike any in recent memory.

Big banks and property developers have taken a huge hit, but that means their dividends are higher, too. (Remember, if the dividend stays the same, a lower entry point results in a higher dividend yield.)

For instance, as CNBC notes, Industrial & Commercial Bank of China (IDCBY) is yielding 5.75 percent. Singapore’s DBS Group Holdings Limited (DBSDF) is paying out 4.36 percent. Keppel Land (KPPLY), a Singapore developer, is paying 6.8 percent.

“These stocks are paying their best dividends in years and it may get better,” Jake Chow, associate vice president of dealing at the brokerage CIMB Securities in Singapore, told the financial cable network.

Should you jump headlong into Asian stock speculation? Heck no.

But you can open the door to international stocks that pay dividends through a variety of U.S.-based exchange-traded funds (ETFs). These will be more tax-efficient, less volatile, and they might just bring a dose of needed vigor to your otherwise sleepy income portfolio.

Here are some ETFs to consider for your international investing strategy.

While not Asian-panic level in their prices, a strong dip in the global markets would be reflected in a sudden increase in payout, there for the taking:

1. iShares Dow Jones EPAC Select Dividend Index Fund (IDV): Seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones EPAC Select Dividend Index. Yield: 3.53 percent.

2. Claymore/Zacks International Yield Hog Index ETF (HGI): Seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an index called the Zacks International Multi-Asset Income Index. Yield: 4.86 percent.

3. PowerShares International Dividend Achievers Portfolio (PID): Based on the International Dividend Achievers Index. Yield: 2.02 percent.

4. WisdomTree DEFA Fund (DWM): seeks investment results that closely correspond to the price and yield performance, before fees and expenses, of the WisdomTree Dividend Index of Europe, Far East Asia and Australasia Index. Yield: 2.13 percent.

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