Where is the Foreign Dividend Surge Directed?
In the global financial landscape, international dividend-focused Exchange-Traded Funds (ETFs) have been shining bright this year. Despite some fluctuations, these funds have managed to outperform their domestic counterparts, as evidenced by the performance of the Pacer Developed Markets International Cash Cows 100 (ICOW) and Pacer Global Cash Cows Dividend (GCOW).
ICOW, with a yield of 4.4%, and GCOW, yielding 3.9%, have been steady performers. In 2025, ICOW has seen a significant growth of 17%, while GCOW has climbed 13%.
However, it's important to note that the dividend landscape overseas is different from that in the U.S. Companies typically pay dividends annually or semiannually, with amounts unrelated to previous years. This can make income predictions less predictable compared to U.S. funds.
One of the standout performers this year is the GlobalX MSCI SuperDividend EAFE (EFAS), which is up 30% through June 20, boasting a 4.5% dividend yield. Another strong contender is iShares International Select Dividend (IDV), which is up 26% for the year so far and pays more than 5%.
The Pacer, Vanguard, and Federated Hermes funds, including the Pacer U.S. Cash Cows exchange-traded fund (COWZ), which employs a free cash flow and dividend strategy overseas, are expected to continue beating the S&P 500 for a while.
The actively managed Federated fund, Federated Hermes International Strategic Value Dividend (IVFAX), pays monthly, though some months have distributions less than 1 cent a share. The foreign version of this fund is light on banks and favours utilities and drugs. It has a low volatility and a 4.9% yield, and is up 19% so far this year.
However, it's not all smooth sailing. Dividend austerity by banks will knock at least a percentage point off the yields of funds such as the Vanguard offering. Relying on foreign stocks for essential and predictable income can be a challenge, as some funds, like GlobalX MSCI SuperDividend EAFE (EFAS), have a propensity to swing in value more than the market overall, especially given its small size.
Fund managers generally forecast moderate growth or stable dividend payouts for international dividend-focused funds, influenced by economic conditions, corporate earnings, and geopolitical factors. Despite these challenges, the allure of higher yields and potential growth continues to attract investors to these international ETFs.
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