DIVI: International Dividend Fund With A Low-Risk Profile /vigi

[Bong Hwan Ahn]

DIVI: International Dividend Fund With A Low-Risk Profile

Feb. 19, 2023 8:18 AM ETFranklin International Core Dividend Tilt Index ETF (DIVI)DNL, DWX, FGD, IDV, PID1 Comment7 Likes

Summary

• DIVI is an international dividend ETF with a 5% plus yield.
• It is well-diversified, shows low historical volatility, and has outperformed competitors in the last 12 months.
• On the downside, liquidity is quite low and distributions are variable.
• Quantitative Risk & Value members get exclusive access to our real-world portfolio. See all our investments here »

IvelinRadkov/iStock via Getty Images

This dividend ETF article series aims at eval‎uating products regarding the relative past performance of their strategies and quality of their current portfolios. As holdings and their weights change over time, reviews may be updated when necessary.

DIVI strategy and portfolio

The Franklin International Core Dividend Tilt Index ETF (NYSEARCA:DIVI) has been tracking the Morningstar Developed Markets ex-North America Dividend Enhanced Select Index since 06/01/2016. It has 537 holdings, a 12-month distribution yield of 5.60% and a cheap expense ratio of 0.09%. Distributions are paid quarterly.

As described in the prospectus by Franklin Templeton, the underlying index “includes a security selection and weighting process that aims to deliver a higher dividend yield than the Parent Index (…) while limiting expected tracking error”. It includes companies from the following countries: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, United Kingdom, and Poland. The index is reconstituted quarterly and the turnover rate in the last fiscal year was 30%.

The fund is mostly invested in large and mega-cap companies (86% of asset value). European companies have an aggregate weight of 58%, followed by Asia (27%). Hong Kong weighs about 3%, so direct exposure to China is low.

Regions (chart: author: data: Franklin Templeton)

Financials are the heaviest sector with 21.5% of asset value. Healthcare, consumer discretionary and industrials are between 10% and 13%. Other sectors are below 9%.

Sector breakdown (chart: author: data: Franklin Templeton)

The top 10 holdings, listed below, represent 14.7% of asset value. The top name weighs about 2% as of writing, so risks related to individual stocks are low.

Name	Weight %	Country	Ticker
NESTLE SA REG	2.06	CH	NESN
ASML HOLDING NV	1.77	NL	ASML
NOVARTIS AG REG	1.67	CH	NOVN
BHP GROUP LTD	1.53	AU	BHP
LVMH MOET HENNESSY LOUIS VUITTON	1.50	FR	MC
NOVO NORDISK	1.46	DK	NOVOB
ASTRAZENECA PLC	1.33	GB	AZN
ROCHE HOLDING AG	1.13	CH	ROG
BNP PARIBAS	1.11	FR	BNP
ALLIANZ SE REG	1.11	DE	ALV

Past performance compared to competitors

The next table and chart compare DIVI performance since June 2016 with five international dividend ETFs:

• The SPDR S&P International Dividend ETF (DWX), reviewed here
• The WisdomTree Global ex-U.S. Quality Dividend Growth Fund (DNL), reviewed here.
• The iShares International Select Dividend ETF (IDV), reviewed here.
• The First Trust Dow Jones Global Select Dividend Index ETF (FGD), reviewed here.
• The Invesco International Dividend Achievers ETF (PID), reviewed here.

since June 2016	Total Return	Annual Return	Drawdown	Sharpe	Volatility
DIVI	68.80%	8.10%	-27.76%	0.61	13.33%
DWX	32.33%	4.26%	-36.05%	0.28	14.05%
DNL	76.12%	8.79%	-34.85%	0.51	17.43%
IDV	44.54%	5.63%	-42.50%	0.35	18.35%
FGD	48.29%	6.04%	-44.84%	0.36	19.37%
PID	61.76%	7.42%	-46.07%	0.44	18.14%

DIVI vs. competitors since 6/1/2016 (Portfolio123)

DIVI is second to DNL in total return, but it has a lower volatility, a lesser drawdown and, last but not least, a better Sharpe ratio. This metric means it is the best of the pack in risk-adjusted return. Moreover, it has outperformed its competitors by 12 to 20 percentage points in the complicated market conditions of the last 12 months. It is the only one in gain in the list, as shown by the chart below.

DIVI vs. competitors, last 12 months (Portfolio123)

DIVI has also its downsides: it is a small fund (about $200M in assets), it is not very liquid (3-month average volume is about 100,000 shares/day), and distributions have been quite variable (see next chart).

Annual distributions (Seeking Alpha)

Takeaway

DIVI holds over 500 stocks from developed countries and implements a strategy focused on yield optimization. Europe represents 58% of asset value and the top sector is financials with 21.5%. The fund is well-diversified across sectors and holdings, The yield looks quite attractive for income-seeking investors, but distributions have been quite variable. It beats 5 of its competitors in risk-adjusted return since inception, and it has performed especially well in the last 12 months.