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iShares International Select Dividend ETF: Uncertainties Caused By COVID-19 May Result In Lower Dividends

Published Tue, 12 May 2020 11:40:17 -0400 on Seeking Alpha

IDV invests in high-yielding stocks in developed markets in Europe, Pacific, Asia and Canada.
IDV pays a 9.3%-yielding trailing 12-month dividend at the moment.
However, the fund’s high exposure to cyclical sectors may result in some dividend cuts especially given the uncertainties introduced by COVID-19.
ETF Overview
iShares International Select Dividend ETF (IDV) focuses on high-yielding dividend stocks in the developed markets. The fund seeks to track the investment results of the Dow Jones EPAC Select Dividend Index, which measures the performance of high dividend-paying companies in the EPAC region (Europe, Pacific, Asia, and Canada). The fund has higher exposure to cyclical sectors as the financial sector represents 37% of the total portfolio. High credit losses due to COVID-19 and the uncertainty regarding how long the pandemic will last may force many financial institutions to eventually cut their dividends. Therefore, we recommend investors to wait on the sidelines.
Fund Analysis
Stringent requirement in order to be included in IDV’s portfolio
IDV constructs its portfolio by picking the 100 highest-yielding stocks from the S&P EPAC BMI index (stocks in developed markets in Europe, Pacific, Asia and Canada). To be included, stocks must also meet the following: 1) paid dividend in each of the past 3 years, 2) their past dividend-per-share ratios must be greater than or equal to their 3-year average annual dividend per share ratios, 3) their five-year average dividend coverage ratios must be greater than or equal to 2/3 of the 5-year average dividend coverage ratio of the S&P EPAC BMI index, 4) these stocks must have positive earnings in the past 12 months, and 5) they must meet certain minimum daily trading volume and have at least $1 billion of market cap.
IDV’s stringent requirement to construct the portfolio should help reduce the risk of including stocks with low dividend coverage ratios and have only a short track record... Read more


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