Global Dividend ETFs Underperform

Rising US bond yields have made already expensive dividend stocks less financially attractive from a risk/reward perspective

Dimitar Boyadzhiev 25 May, 2018 | 12:48PM
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Dividend-focused global equity ETFs have lagged the MSCI World Index in the past three years, largely driven by the rising US bond yields after the Federal Reserve’s interest-rate hikes. During this period, the US two-year Treasury yield has gone up from 0.65% to around 2.50%, and this has made already expensive dividend stocks less financially attractive from a risk/reward perspective. In addition, Morningstar analysts argue that global dividend equity ETF investors have suffered from a structural underexposure to technology companies. 

To gain a better understanding of the key drivers of returns, we have compared the performance of the Morningstar Developed Markets Dividend Yield Focus Index, which we use as a good proxy for global dividend equity benchmarks, with that of the MSCI World Index. 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
iShares STOXX Global Sel Div 100 (DE)28.78 EUR-0.79
Lyxor SG Global Qual Inc NTR ETF D EUR GBP10,084.00 GBX0.44Rating
Vanguard FTSE AllWld HiDivYld ETF $Dis63.24 USD0.85
Xtrackers Stoxx Glb Sel Div 100 SwpETF1D GBP2,487.50 GBX-0.17Rating

About Author

Dimitar Boyadzhiev  is a Passive Strategies Research Analyst for Morningstar