Europe Matters for This Dividend ETF

As its name implies, the ALPS International Sector Dividend Dogs ETF (IDOG) is a play on ex-U.S. dividend-paying equities.

To be specific, the $394.22 million ETF focuses on developed market equities and it’s a dividend yield strategy. But that doesn’t mean IDOG isn’t levered to rising payouts in Europe. All but four of the ETF’s country exposures are European nations. And the four that aren’t combine for less than 30% of the fund’s portfolio. IDOG’s Europe exposure is pertinent. That’s because dividends have long been vital contributors to European equity performance, much more so than in North America.

“Over the entire period of the past 40 years, almost 39% of the MSCI Europe’s annualised total return on equity investments was driven by the performance contribution of dividends. In North America (MSCI North America) and Asia-Pacific (MSCI Pacific), dividends contributed just under 22% and just over 41% of total performance, respectively,” according to Allianz.

IDOG Dividend Star Can Shine

Experienced international investors know that Europe has long offered dividend yields well in excess of domestic equity benchmarks. Helped by that scenario, IDOG’s trailing 12-month dividend yield of 4.08% is well above what investors find with many comparable domestic-focused ETFs.

However, investors — including those mulling IDOG — shouldn’t overlook the commitments to payout growth held by many European firms, including some residing in the ALPS ETF.

“Dividends by companies in the broad European equity index MSCI Europe amount to around EUR 440 billion in 2024. Dividends are expected to total around EUR 459 billion in 2025. This represents an increase of 4% year-on-year. In 2026, dividends are forecast to be around 496 billion euros (up 13% from 2024),” added Allianz.

Dividend Growth, Yields Not Linear Across Regions

Something to note with multicountry ETFs such as IDOG is that dividend growth and yields aren’t linear across regions. That means some countries are stronger contributors to IDOG’s income stream. Fortunately, IDOG is levered to some compelling dividend stories. Payouts are on the rise in Japan — the ETF’s largest ex-Europe geographic exposure.

The same is true in Germany, which is the eurozone’s largest economy and the fifth-largest country weight in IDOG. Germany’s dividend outlook is particularly enticing. That’s because yields on stocks are close to topping bund yields. Some stocks there already accomplished that feat.

“In Germany, dividends are expected to increase from around 57 billion euros in 2024 to around 63 billion euros in 2025, and could reach 70 billion euros in 2026,” concluded Allianz.

VettaFi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for IDOG, for which it receives an index licensing fee. However, IDOG is not issued, sponsored, endorsed, or sold by VettaFi. VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of IDOG.

For more news, information, and analysis, visit the ETF Building Blocks Content Hub.

Earn free CE credits and discover new strategies