Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some global dividend stocks to your portfolio but don't have the time or expertise to hand-pick a few, the WisdomTree DEFA ETF (NYSEMKT: DWM ) could save you a lot of trouble. Instead of trying to figure out which global dividend stocks will perform best, you can use this ETF to invest in lots of them simultaneously. It focuses on dividend-paying companies based in Europe, Far East Asia, and Australasia, and its dividend yield was recently 3.5%.
ETFs often sport lower expense ratios than their mutual fund cousins. This ETF, focused on global dividend stocks, sports a relatively low expense ratio -- an annual fee -- of 0.48%. The fund is not huge, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This global dividend stocks ETF has roughly matched the world market over the past three and five years, slightly beating it in 2012 and slightly lagging it so far this year. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
Why global dividend stocks?
It's a smart idea to diversify your holdings not only by market size and industry but also geographically. If the U.S. economy stalls or slides, other economies may still be performing well and could help offset losses in your portfolio. Global dividend stocks offer an extra bonus, as dividends can be quite powerful. Internationally reaped ones can be a little more complicated than domestic ones, though.
More than a handful of global dividend stocks had strong performances over the past year. Vodafone (NASDAQ: VOD ) , headquartered in the U.K., surged 45% and yields a whopping 5.6%. Vodafone is collecting some $130 billion from Verizon for its 45% stake in Verizon Wireless, which will help fund its growth abroad. Meanwhile, there's now talk of AT&T possibly buying Vodafone. Some have been concerned about Vodafone's free cash flow and its revised dividend policy, but others see it as attractively valued.
Novartis (NYSE: NVS ) , a Switzerland-based pharmaceutical giant, jumped 35% and yields 3.3%. It suffered a patent expiration for its multibillion-dollar Diovan drug last year but has no more major impending expirations anytime soon. Novartis has received a bunch of breakthrough therapy designations from the FDA, and its pipeline is promising. It has a diverse array of drugs on the market, but some worry about new and competing drugs, some of which offer less scary side effects. The company's third quarter offered mixed results, including disappointing earnings but increased projections.
France-based oil giant Total S.A. (NYSE: TOT ) jumped 28% and yields 4.4%. Total is already diversified and is expanding its reach more, boosting its liquefied-natural-gas operations and investing in solar energy. Total has plans to drill in the Arctic, but it's also proceeding carefully there, sensing great risk. Other risks for investors in Total include its debt and other obligations. On the other hand, it sports an appealing valuation.
Then there's beleaguered BP (NYSE: BP ) , advancing a solid 17% and yielding 4.6%. My colleague Tyler Crowe lays out a major issue for its investors: "BP has spent approximately $42 billion for everything related to the spill, and it is on the hook for another potential $55 billion for charges from both the Clean Water Act and local and state government claims." BP has sold many assets to generate needed funds, but it has also retained a promising project portfolio. On the other hand, drilling costs have been rising, and the company's hydrocarbon production has slipped.
The big picture
If you're interested in adding some global dividend stocks to your portfolio, consider doing so via an ETF. A well-chosen ETF can grant you instant diversification across any industry or group of companies and make investing in it -- and profiting from it -- that much easier.