As the investment landscape continues to shift, interest rates change, and new risks enter the picture, investors seeking strong income from their portfolios now have to navigate swiftly and precisely. Dividends have long been tapped by investors for these sorts of situations thanks to their inflation-fighting feature, lower volatility, and cash-in-hand returns. But even tried-and-true dividend strategies can be improved upon.
One of the best ways to approach this is by thinking globally and with an active touch.
Thanks to constant changes and different environments, yields, and risks across the globe, active dividend investors can enhance their returns and income potential. And thanks to the boom in active ETFs, going global with dividends has never been any easier.
Why Dividends Today?
Truth be told, the world continues to be awash in risk. From geopolitical woes such as the continuing conflicts in Israel and the Russian/Ukraine crisis to fiscal worries about rising deficits and debt, it hasn’t been smooth sailing for the markets this year. Rising inflation, slowing global growth, and tighter rates have amplified volatility across a variety of asset classes.
All of these risks have reset investor expectations. No longer are we in an environment where capital appreciation overshadows value and price. As we transition out of this phase and move towards a more historic and traditional investing paradigm, dividends are becoming increasingly valuable to portfolios.
The why comes down to dividends and their roles in portfolios as both a driver of returns and a source to reduce volatility.
Dividend stocks can provide ballast to a portfolio during periods of duress because steady dividend payers return cash to their shareholders. Those firms with long streaks of dividend payouts tend not to break those streaks. Moreover, those firms that have dividend growth and long streaks of payouts tend to exhibit quality factors.
As investors know, they’ll get 2% to 4% in cash before anything else, dividend stocks have exhibited lower volatility of share price than non-dividend payers.
That cash in hand has long been a major driver of returns. According to asset manager Thornburg, since 1871, dividends have comprised around half, 49.3%, of the S&P 500’s total return. 1
Going Global & Active Together
Dividends are an essential piece of the total return pie. Increasingly, going global with those payouts can enhance those total returns even more. Historically, U.S. dividend yields and growth led the charge. But with the changing conditions, such as rising inflation, slowing global growth, and tighter rates, volatility has amplified. That’s why a global dividend approach could be a smart strategy.
For starters, additional yield could be had overseas.
There’s sort of a different dividend culture overseas. Rather than focus on buybacks to fuel growth and to allow family or state ownership structures to keep their stakes intact, many international firms pay dividends as a set percentage of profits. This generally leads to higher overall yields.
For example, Japan. The dividend yield of the Nikkei 225 is now higher than many G7 peers, including the U.S. Europe also offers compelling yields through solid multinationals. This chart from Thornburg highlights some of the bigger yields found overseas. As you can see, the U.S. is one of the smallest dividend markets in terms of yield vs many of its developed peers.
Source: Thornburg
Those yields are getting larger as well. That’s because the U.S. dollar is starting to decline. As euros, francs, and yen get translated back into dollars, investors make more on the carry and get larger payouts and boost yields. Janus Henderson estimates that the strong dollar in 2024 and the less favourable exchange rates reduced international dividend yields by about 1.1 percentage points. With the dollar now declining, investors have an opportunity to grab higher yields. 2
The thing is, Japan is different from Canada, which is different from Brazil, which is different from Germany. In the new world of shifting volatility, rewriting global trade, and other geopolitical factors, painting a broad stroke on nations and their companies doesn’t make much sense. That’s just the sort of inefficiency that active management can win at.
By not resembling an index, active managers can exploit higher yields elsewhere, hedge against currency risk, and identify the strongest companies that matter. This focus on global dividends with an active approach could be the best way to achieve real diversification, reduce volatility, and ultimately enhance income and returns.
Active Global Dividends
With yields greater overseas and dividends helping reduce volatility while enhancing returns, the time for a global dividend strategy is now. An active touch could improve their benefits even further.
The best part is that the active ETF boom has continued to drive the number of new products in the sector to new levels. Active ETFs are low-cost vehicles. Investors pay expenses directly out of gains and dividends. With lower expense ratios, investors get to keep more of their dividends, and this results in a higher overall yield. The added win is that the creation redemption mechanism of ETFs prevents capital gains in the fund itself. In-kind transfers between authorized participants remove this headache from investors. Capital gains are only realized when investors choose to sell their shares.
With that, it makes a ton of sense to go global and use active ETFs for your dividend dollars.
Active International Dividend ETFs
These ETFs were selected based on their exposure to international dividend stocks with an active management approach. They are sorted by their YTD total return, which ranges from 6% to 22%. They have expense ratios between 0.32% and 2.81% and assets under management of $3M to $716M. They are currently yielding between 2.3% and 12.6%.
| Ticker | Name | AUM | YTD Total Ret (%) | Yield (%) | Exp Ratio | Security Type | Actively Managed? |
|---|---|---|---|---|---|---|---|
| INEQ | Columbia International Equity Income ETF | $7.85M | 22.2% | 5% | 0.46% | Yes | |
| IDVO | Amplify CWP International Enhanced Dividend Income ETF | $178M | 17.4% | 6% | 0.66% | ETF | Yes |
| ADVE | Matthews Asia Dividend Active ETF | $3.2M | 12.2% | 2.3% | 0.79% | ETF | Yes |
| DGRE | WisdomTree Emerging Markets Quality Dividend Growth Fund | $128M | 11.3% | 2.5% | 0.32% | ETF | Yes |
| BIDD | iShares International Dividend Active ETF | $716M | 11.1% | 4.5% | 0.61% | ETF | Yes |
| JHID | John Hancock International High Dividend ETF | $8M | 6% | 12.6% | 2.81% | ETF | Yes |
All in all, dividends are becoming more valuable to portfolios as the market’s dynamics shift and volatility rises. Even more critical is the focus on global dividends. Diversification benefits, higher yields, and lower volatility await. Adding an active touch only enhances the benefits even further. Going international and active with your dividends is a must these days.
Bottom Line
Thanks to a variety of risks and changes, dividends are quickly regaining their mojo. And increasingly, investors are turning towards global dividends for additional yield and returns. By choosing an active touch, investors can get even more from their dividend portfolios.
1 Thornburg (May 2024). Global Dividends: An All-Weather Investment Strategy
2 Janus Henderson (March 2025). Janus Henderson Global Dividend Index Editon 45
