Understandingly, a key focus for investors is an investment’s total return, a measure of performance that incorporates both the change in the price of the investment itself and the income that it generates. In our accompanying piece this week, we cited several reasons to maintain a healthy allocation to international equities. We would add the relative attractiveness of dividend yields to that list.
Seldom a focal point for equity investors, dividends not only provide a valuable source of income, but also offer a positive starting point for total return. During periods of equity market volatility (like that in late 2018), dividends can provide a valuable buffer to volatile equity prices.
Over the past twenty years, international equities have consistently paid a higher dividend than domestic equities, and currently carry a yield of about 3.5%, exceeding that of the broad U.S. equity market by over 1.25%. In an environment in which equity returns are projected to be in the mid to high single-digit range, dividends are valuable, and the incremental yield associated with international equities is one of several positive factors supporting the asset class.
The dividend advantage is another reason for investors to maintain a healthy allocation to international equities as part of a diversified portfolio.
Data sources for peer group comparisons, returns, and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources believed to be reliable. However, some or all of the information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes only to reflect the current market environment; no index is a directly tradable investment. There may be instances when consultant opinions regarding any fundamental or quantitative analysis may not agree.
Plante Moran Financial Advisors (PMFA) publishes this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult a representative from PMFA for investment advice regarding your own situation.