Another Quality Dividend ETF From WisdomTree

WisdomTree Investments Inc. WETF bolstered its lineup of dividend exchange traded funds emphasizing the quality factor Thursday with the introduction of the WisdomTree International Quality Dividend Growth Fund IQDG.

The WisdomTree International Quality Dividend Growth Fund follows the WisdomTree International Quality Dividend Growth Index (WTIDBG), which marries the growth and quality factors.

IQDG's underlying index's “growth factor ranking is based on long-term earnings growth expectations, while the quality factor ranking is based on three year historical averages for return on equity and return on assets. Companies are weighted in the Index based on annual cash dividends paid,” according to New York-based WisdomTree.

Home to nearly 300 companies, IQDG's index has a dividend yield of 2.93 percent. Although the U.S. is the world's largest dividend market, international dividends can play an important role in investors' portfolios. After all, as WisdomTree notes, 48 percent of dividends come from countries outside the U.S. Other developed markets, such as Australia, Switzerland and the U.K., have strong track records of dividend growth.

Others, such as Japan, are new but credible entrants to the international dividend growth story. The U.K., Japan and Switzerland are IQDG's three largest country allocations while Australia is seventh on the new ETF's roster. Combined, the quartet represents about half of IQDG's geographic lineup. Germany, the Netherlands and France combine for about 21 percent of the new ETF's weight. Germany and France are the Eurozone's two largest economies.

“The emphasis on quality measures is a critical distinguishing factor for the International Dividend Growth Index that enables us to identify and avoid companies that are using excessive leverage to achieve their return on equity—in IQDG, this results in having an under-weight to Financials. Conversely, Consumer Staples and Consumer Discretionary receive greater over-weights, as they typically have higher return-on-equity and return-on-assets metrics,” according to WisdomTree. 

Underscoring IQDG's application of quality at the sector level, consumer staples and discretionary names combine for 41.5 percent of the ETF's weight while financial services are the fund's third-smallest sector weight at just under 5.4 percent.

Given its country weights, IQDG competes with the widely followed MSCI EAFE Index and the corresponding ETFs. Over the past year, IQDG's underlying index posted a modest gain while the MSCI EAFE Index lost more than eight percent, according to WisdomTree data.

IQDG charges 0.38 percent per year, or $38 for every $10,000 invested. WisdomTree is the fifth-largest U.S. ETF issuer.