ASMLF - BGY: Strong Dollar Weighs On International Markets, But Don't Ignore Them

2025-01-29 12:17:18 ET

Summary

• The BlackRock Enhanced International Dividend Trust offers high income and international diversification, which has hurt it in the past few months.
• U.S. equities are richly valued, suggesting potential for disappointing returns, making international diversification through this fund appealing.
• The fund appears to be actively trying to keep its U.S. allocation low, which furthers its international appeal.
• The strengthening of the U.S. dollar over the past three months has weighed on international equities, but there are still reasons not to ignore them.
• Current valuation at a 9.52% discount to NAV is attractive compared to peers, offering a good entry point for investors.

The BlackRock Enhanced International Dividend Trust ( BGY ) is a closed-end fund that investors can purchase in order to diversify their assets away from the United States as well as earn a high level of income in the process. Unfortunately, this has not been a particularly effective strategy over the past decade, as international equities have underperformed domestic ones by a fairly substantial margin. We can see this quite clearly by looking at the performance of the MSCI All-Countries World ex-U.S. Index ( ACWX ) against the S&P 500 Index ( SPY ):

The above chart does take into account dividends paid by the components of each index, which is very important due to the simple fact that foreign equities tend to have higher yields than equities found in the United States. This can be clearly seen by looking at the yields of each of the two indices:

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