DIVI - DIVI: A Good Choice For International Investing

2023-11-07 13:24:05 ET

Summary

• Franklin International Core Dividend Tilt Index ETF offers affordable developed markets equity exposure with a dividend-centric methodology.
• DIVI has consistently performed well compared to competitors and its category.
• DIVI presents an attractive investment opportunity for those seeking capital appreciation and income generation with a focus on high dividend-yielding international equities.

International investing has been brutally difficult over the last decade, but perhaps the next one will be different. I favor looking at opportunities overseas and tilting towards dividend players. To that end, the Franklin International Core Dividend Tilt Index ETF ( DIVI ) is worth a look.

DIVI is an ETF that primarily invests in large and mid-cap stocks from developed markets outside North America. Franklin Resources, Inc. initiated the fund on June 1, 2016, with management under the umbrella of Franklin Advisory Services, LLC. Its objective is to emulate the results of the Morningstar Developed Markets ex-North America Dividend Enhanced Select Index. This underlying index, which is maintained and computed by Morningstar, Inc., applies a dividend-centric methodology with the intent to yield a higher dividend than the parent index while maintaining a minimal tracking error.

With an expense ratio of just 0.09%, DIVI offers affordable developed markets equity exposure. DIVI's investment strategy is centered on providing optimal returns by leveraging a "dividend tilt." The fund applies an optimization process to the trailing 12-month dividend yields of its eligible securities, aiming to maximize dividend yield while minimizing tracking error relative to the parent index. The ETF's portfolio is primarily composed of large and mega-cap companies, with strong exposure to countries like Japan, the United Kingdom, and Australia.

The fund also has a significant allocation to sectors such as financials, healthcare, consumer discretionary, and industrials. Notice the Technology allocation is just around 8%. This makes this automatically a good diversifier against US large-cap market averages which tend to be tech-heavy in their overall weighting.

Performance Analysis of DIVI

DIVI has done well despite a challenged part of the investable landscape. Relative to competitors and its category, we can see it is fairly consistently been in the top tier of performance. The methodology appears to be working well.

Dividend Yield of DIVI

The dividend yield is a key factor that draws investors to DIVI, and surprisingly it's not really that high. According to YCharts, it's at 2.37% now, and overall the dividend yield has been all over the place. Not a negative, but worth keeping in mind despite the name of the ETF.

Peer Comparison

One ETF that closely resembles DIVI is the iShares International Select Dividend ETF ( IDV ), which also aims to provide international exposure with a focus on dividend income. However, IDV includes the Canadian market and has a large exposure to it. This makes it less representative of the global market compared to DIVI. And on a relative basis, DIVI has outperformed.

The Verdict

Investing in DIVI, like all investments, carries certain risks. Due to its international focus, DIVI is exposed to risks such as currency fluctuations and geopolitical uncertainties. Additionally, the fund's high concentration in certain sectors and industries may increase its volatility. Overall though, the Franklin International Core Dividend Tilt Index ETF presents an attractive investment opportunity for those seeking a blend of capital appreciation and income generation. With its focus on high dividend-yielding international equities, affordable expense ratio, and strong relative performance, DIVI could be a valuable addition to a diversified investment portfolio.

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