Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some international dividend stocks to your portfolio but don't have the time or expertise to hand-pick a few, the WisdomTree International LargeCap Dividend ETF (DOL 1.01%) could save you a lot of trouble. Instead of trying to figure out which stocks will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. This ETF, focused on international dividend stocks, sports a relatively low expense ratio -- an annual fee -- of 0.48%. It recently yielded close to 3.2%. The fund is on the small side, too, 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 international dividend stocks ETF has roughly kept pace with the world market over the past three years, but lagged it over the past five. 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 international 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. International dividend stocks offer an extra bonus, as dividends can be quite powerful wealth builders. Internationally reaped ones can be a little more complicated than domestic ones, though.
More than a handful of international dividend stocks had strong performances over the past year. Vodafone Group (VOD 0.45%), for example, popped 38%. Vodafone Group has had an eventful past year, with shareholders approving the sale of its remaining stake in Verizon Wireless to Verizon for $130 billion. The U.K.-based telecom titan is poised to profit from Europe's rebounding economy, and it's making further investments in Europe and locations, such as India, too. Still, bears worry about Vodafone's shrinking cash flow, with some wondering whether it's spending too much on acquisitions. (It's in the process of buying Spanish cable company Ono, for example.)
Banco Santander (SAN 2.05%) jumped 27%, and recently yielded about 7.2%. It has been fighting weakness in Europe, but that has been abating. Based in Spain, it offers considerable geographic diversification, with substantial operations in faster-growing Latin America and South America. Bulls also like that it's focused on traditional retail banking as opposed to higher-risk businesses such as investment banking. Its CEO proclaimed last year, "After several years of high levels of write-offs and reinforcement of capital, Banco Santander is preparing for a new period of increased profitability."
Oil giant BP (BP 0.75%) gained 22% and recently yielded 4.7%, but that doesn't make it appealing enough to buy, for some investors. The company's fourth quarter featured revenue slipping and net income down 30% over year-ago levels, in part because of weak refining margins, its divestment program, and Deepwater Horizon spill-related costs. BP has sold many assets to generate needed funds, but bears worry about its ultimate spill-related costs, which remain unknown. The company has retained a promising project portfolio, though, and bulls like its strong reserve replacement ratios, too, along with how it has been shrinking its debt and rewarding shareholders. The recent upheaval in Ukraine has many investors concerned, as BP has investments in the region, but the strife could actually work in BP's favor, if it leads to stronger interest in a pipeline to Europe that bypasses Ukraine.
Other international dividend stocks didn't do quite as well over the past year but could see their fortunes change in the coming years. Sanofi (SNY -0.40%), for example, advanced just 3% and yields 3.8%. My colleague Stephen Simpson likes how it generates solid cash flow through its franchises in diabetes, rare diseases, and vaccines, and sees it offering a compelling risk-reward proposition. (Sanofi got much of its rare-disease business via its acquisition of Genzyme.) Sanofi's fourth quarter was mixed, with revenue slipping 1% but adjusted earnings popping by 17%. Bears worry about the looming patent expiration of its blockbuster insulin offering, Lantus, but others see that offset by the potential of its pipeline.
The big picture
If you're interested in adding some international 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 and profiting from it that much easier.