Franklin Templeton on International Dividends

At the recent Exchange conference, there was much chatter among advisors concerning the growing role of international dividends.

Todd Mathias, Head of U.S. ETF Product Strategy & Development at Franklin Templeton, sat down with VettaFi to discuss the shift toward international dividend strategies.

The Advantage of International Dividends

Many advisors are asking why they should focus on generating income from international markets now, Mathias noted. The answer, he suggests, lies in the fundamental composition of these markets compared to the tech-heavy U.S. landscape.

While U.S. markets are currently driven by technology firms that prioritize R&D, international markets – specifically in the Automotive and Financial sectors – have a long history of paying out a larger portion of their income to investors. Mathias highlighted household names like Mercedes-Benz and BMW, as well as healthcare providers in Denmark and Switzerland, as examples of high-yielders that offer a different profile than the Mag Seven style growth seen in the U.S.

To bolster portfolios with international dividends, Mathias detailed three specific products. These function as a cohesive suite with very little overlap in common holdings.

First, the Franklin International Core Dividend Tilt Index ETF (DIVI) can be described as the anchor of an international sleeve. This fund offers a tilt toward income with low active risk relative to the overall market.

Meanwhile, the Franklin International Low Volatility High Dividend Index ETF (LVHI) focuses on the low volatility factor, aiming to lower risk relative to the broad market through currency hedging and a focus on high-quality, profitable companies.

Finally, for those in pursuit of the highest income stream, the Franklin International Dividend Booster Index ETF (XIDV) targets high-yield opportunities with controlled risk.

Looking Ahead at the ETF Industry

Looking ahead, Mathias shared a bold prediction for the industry. Franklin Templeton expects that by 2040, the ETF industry will reach $90 trillion in assets. Furthermore, the firm anticipates active products or “active insights delivered through an index-based approach” will receive 45% of that.

As the generational shift continues, Mathias observes that the need for an income stream in an “okay” rate environment — and the volatility dampening that comes with it — has made international dividends a top-of-mind topic.

For more news, information, and analysis, visit VettaFi | ETF Trends.

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

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