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ETF Specialist

How Risky Are International Dividend ETFs?

Don't forget about quality when investing in dividend-paying companies abroad.

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The most popular domestic and international dividend exchange-traded funds are differentiated by more than just their regional exposure. The domestic ETFs with the largest share of inflow over the past year are constructed to offer total return by focusing on high-quality dividend payers. As a result, these funds tend to have yields only slightly higher than that of the S&P 500, but they outperform over time on both a total return and risk-adjusted basis. The most popular international dividend ETFs are somewhat riskier and boast dividend yields that tend to be significantly higher than that of the popular benchmark MSCI EAFE Index. These ETFs are more speculative and volatile than the quality dividend strategies that are so popular for U.S. stocks. Investors looking for total return should carefully examine international dividend ETFs to ensure they're not unwittingly taking on more risk than expected.

Abby Woodham does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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