🌍 DIVI: Your Global Dividend Passport

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Hello, and welcome back to ETF UNO, your go-to source for everything ETF investing. We're thrilled to have you here, and we hope you're ready to dive into another exciting topic. In today's newsletter, we'll explore the ETF DIVI, which can boost your portfolio with higher dividend yields from developed markets outside North America. We'll examine its geographic and sector exposures, highlight its top holdings, analyse its performance, and weigh the pros and cons of adding this global dividend hunter to your investment arsenal. Buckle up, dividend enthusiasts – it's time to go on a worldwide quest for income!

What is DIVI?

In a world where yield can be hard to come by, the DIVI ETF stands out as a unique opportunity, a beacon exclusively for income-seeking investors like you. But what exactly is DIVI, and why should it be a privileged part of your investment strategy?

DIVI, from the reputable Franklin Templeton, is an ETF designed to deliver a higher dividend yield from developed equity markets outside North America. It serves as your gateway to a world of international dividend opportunities, carefully selected to enhance your portfolio's income potential and confidence in your investment decisions.

But what exactly is 'dividend-enhanced equity investment', and why does DIVI concentrate on markets beyond the United States? Here's the scoop:

• 📊Diversification: By venturing outside North America, DIVI offers exposure to a broader range of economic cycles, industries, and company-specific factors.

• 🪴Yield Potential: Many developed markets outside the U.S. have a strong dividend culture, with companies often offering higher payout ratios.

• 📈Valuation Opportunities: International markets sometimes trade at lower valuations than U.S. equities, offering better value for dividend-focused investors.

• 💴Currency Diversification: Investing in international dividend-paying stocks can provide a hedge against U.S. dollar fluctuations.

Now that we've set the stage let's examine where DIVI concentrates its efforts.

High-Weight Exposures: A Trio of Opportunity🏛️

DIVI doesn't just cast a wide net; it strategically focuses on key markets and sectors that offer compelling dividend opportunities. Let's explore the ETF's three primary high-weight exposures:

1. Japan: Land of the Rising Dividends🗾

Japan, the world's third-largest economy, plays a significant role in DIVI's portfolio, which has a heavy weight of 21.3%. But wait, isn't Japan known for its historically low dividend yields? Times are changing, and here's why Japan is now a hotspot for dividend hunters:

• Corporate Governance Reforms: Recently, there has been a push for better shareholder returns, encouraging companies to increase dividends.

• Cash-Rich Companies: Many Japanese firms sit on substantial cash reserves, providing potential for dividend growth.

• Economic Policies: The government's focus on boosting domestic demand and improving corporate profitability could benefit dividend-paying stocks.

2. United Kingdom: A Dividend Tradition💂

The UK has long been known for its dividend-friendly culture, and DIVI taps into this rich vein of income potential with a weight of 13.6%. Here's why the UK remains an attractive market for dividend investors:

• High Yield Environment: UK companies often offer higher dividend yields than their global peers.

• Diverse Sector Exposure: The UK market provides access to various dividend-paying industries, from consumer staples to financials.

• Value Opportunities: Brexit-related uncertainties have created potential value opportunities in UK stocks.

3. Financials: Banking on Dividends 🏦

The financial sector forms a cornerstone of DIVI's strategy with the highest sector weight of 24.8%, and for good reason:

• Yield Potential: Banks and insurance companies often offer attractive dividend yields.

• Economic Sensitivity: Financials can benefit from rising interest rates and economic growth, potentially leading to dividend increases.

• Global Exposure: Many financial institutions in DIVI's portfolio have international operations, providing built-in geographic diversification.

DIVI aims to create a powerful combination of yield potential and growth opportunities by focusing on these three areas.

Top Holdings: A Who's Who of Global Dividend Payers📃

Behind every great ETF is a carefully selected group of holdings. DIVI's top 10 reads like a who's who of international blue-chip companies. Let's take a closer look at these dividend dynamos:

1. Novo Nordisk (Denmark - Healthcare) Danish pharmaceutical giant Novo Nordisk is a world leader in diabetes care and obesity treatment. With a strong pipeline and growing product demand, Novo Nordisk offers a compelling blend of growth potential and dividend stability.

2. ASML (Netherlands - Technology) is the world's leading supplier of photolithography systems for the semiconductor industry. As chips become more complex, ASML's technology becomes increasingly critical, positioning it well for future growth and dividend increases.

3. Nestle (Switzerland - Consumer Staples) The world's largest food and beverage company, Nestle boasts a diverse portfolio of brands and a long history of dividend payments. Its nutrition, health, and wellness focus aligns well with global consumer trends.

4. Novartis (Switzerland - Healthcare) Novartis is known for its innovative pharmaceuticals and generics business. With a robust drug pipeline and consistent cash flows, Novartis has been a reliable dividend payer.

5. Toyota Motor (Japan - Consumer Discretionary) The world's largest automaker, Toyota, is at the forefront of hybrid and electric vehicle technology. Its strong balance sheet and focus on efficiency have allowed it to maintain dividends even in challenging times for the auto industry.

6. HSBC (UK - Financials) One of the world's largest banks, HSBC offers significant exposure to developed and emerging markets, particularly in Asia. Its diverse revenue streams and strong capital position support its attractive dividend yield.

7. AstraZeneca (UK - Healthcare) This British-Swedish pharmaceutical company has been making waves with its oncology and respiratory disease treatments. Its focus on high-growth therapeutic areas positions it well for future dividend growth.

8. Roche (Switzerland - Healthcare) Roche is a global pioneer in pharmaceuticals and diagnostics. Its strong position in oncology and personalized healthcare, coupled with a history of innovation, underpins its ability to pay consistent dividends.

9. SAP (Germany - Technology) Europe's largest software company, SAP is a leader in enterprise resource planning (ERP) software. Its transition to cloud-based services opens new growth avenues while maintaining a solid dividend.

10. LVMH (France - Consumer Discretionary) Luxury goods conglomerate LVMH owns a portfolio of premium brands in fashion, wines & spirits, and cosmetics. Its exposure to high-end consumers and emerging markets supports growth and dividend potential.

DIVI at a glance

ETF Issuer: Franklin Templeton

Inception: 01/06/2016

Asset Class: Equity

Underlying Index: Morningstar Developed Markets ex-North America Dividend Enhanced Select Index-NR

Geographical Focus: Global ex-North America

Expense Ratio: 0.09% (as of last data point)

Dividend Yield: 4.18% (as of last data point)

Distribution Frequency: Quarterly

Historical Performance

DIVI's performance reflects its nature as a globally diversified, dividend-focused ETF. While it may not always lead the pack in total returns, its consistent dividend payments and relative stability during market downturns make it an attractive option for income-focused investors seeking international exposure.

The investor should note that on August 1, 2022, the Fund's underlying index was changed from the LibertyQ International Equity Hedged Index to the Morningstar® Developed Markets ex-North America Dividend Enhanced Select IndexSM. Fund performance before that date reflects the Fund's seeking to track the performance of the LibertyQ International Equity Hedged Index. 

ETF Radar View

The radar chart below shows the general characteristics of the ETF:

Top 3 Reasons to Invest

1. Enlightening Exposure to Different Dividend Cultures: Dividend policies and payout ratios can vary significantly across countries and regions. Many international companies, particularly in Europe and Japan, have traditionally placed a greater emphasis on returning capital to shareholders through dividends compared to their U.S. counterparts. This knowledge can enlighten and inform potential investors about the diversity of dividend cultures.

2. Potential for Higher Yields: DIVI's focus on higher-yielding stocks in developed markets can provide an advantage over broad-based international or U.S. equity indices. This makes it an attractive option for income-seeking investors or those nearing retirement.

3. Currency Diversification: For U.S.-based investors, DIVI offers a way to diversify currency exposure, which can be beneficial in specific economic scenarios. When the U.S. dollar weakens against foreign currencies, returns from international investments like DIVI can be boosted when translated back into dollars.

Top 3 Reasons Not to Invest

1. Geopolitical and Economic Risks: Investing internationally exposes you to geopolitical and economic risks specific to the countries represented in the ETF. Brexit, trade tensions, or regional economic slowdowns can impact DIVI's performance. Investors seeking a more stable political and economic environment prefer domestic investments.

2. Sector Concentration: DIVI's significant exposure to the financial sector means its performance can be disproportionately affected by factors impacting banks and insurance companies. This concentration could concern investors seeking broader sector diversification, as it might not appeal to them.

3. Potential for Lower Capital Appreciation: DIVI might sacrifice some growth potential by focusing on higher-yielding stocks. During strong bull markets or periods of rapid technological advancement, this ETF could underperform growth-oriented or broad-market indices. Investors prioritising capital appreciation over income might find other ETFs more suitable.

Hunting for Global Dividends🔍

Let's wrap up our look at the DIVI ETF with a quick summary:

• DIVI invests in high-yield stocks from developed markets outside North America, focusing on Japan, the UK, and the financial sector.

• It includes top companies from various sectors and countries.

• Benefits of DIVI include global diversification, exposure to different dividend cultures, potential for higher yields, and currency diversification.

• However, risks include currency fluctuations, geopolitical issues, sector concentration, and possibly lower capital growth.

Whether DIVI fits your portfolio depends on your financial goals, risk tolerance, and investment strategy.

We hope you found this overview helpful. At ETF UNO, we aim to provide insights to help you with ETF investing. Join our community for more articles, expert interviews, and timely ETF insights. Keep learning to make informed investment decisions. Thanks for joining us, and happy investing!

DISCLAIMER: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research and consider consulting with a financial advisor before making investment decisions.