A sound investment process and strong management team underpin Xtrackers MSCI EAFE High Div Yld Eq ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's investment process inspires confidence and earns a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in quality exposure and an underweight in volatility exposure compared with category peers. A high quality exposure means holding stocks that are consistently profitable, growing, and have solid balance sheets. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

TotalEnergies SE

Novan

BHP Billiton

Autoliv

Banco Santander

Rio Tinto plc Sponsored

Credit Suisse

Western Gas Partners

Brookfield Corp

Woodside Energy Group Ltd

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Xtrackers MSCI EAFE High Div Yld Eq ETF earns a High Process Pillar rating. 

The most important driver of the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Strong risk-adjusted performance also contributes to the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The parent firm's five-year risk-adjusted success ratio of 58% reinforces the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Their relatively high success ratio suggests that this firm does well for investors and that this fund may benefit from that.

 This strategy tends to hold larger, more value-oriented companies than its average peer in the Foreign Large Value Morningstar Category. Looking at additional factor exposure, this strategy has consistently favored high-quality stocks, including those with low financial leverage and solid returns on equity, compared with Morningstar Category peers during recent years. This means the fund holds consistently profitable, growing companies with solid balance sheets that may help it weather downturns better than Morningstar Category peers. In recent months, the strategy was more exposed to the Quality factor compared with its Morningstar Category peers as well. The managers have also shown an underweight risk tilt, demonstrated by lower volatility exposure over peers in recent years. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In this month, the strategy also had more exposure to the Yield factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in basic materials and utilities relative to the category average by 8.6 and 4.1 percentage points, respectively. The sectors with low exposure compared to category peers are technology and industrials, underweight the average by 7.2 and 6.8 percentage points of assets, respectively. The strategy owns 145 securities and is relatively concentrated. Specifically, 37.8% of the fund’s assets are housed within the top 10 holdings, as opposed to the category’s 13.9% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 29% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

High

Process

Xtrackers’s team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. There are four managers listed on the fund: Shlomo Bassous, Bryan Richards, Patrick Dwyer, Ashif Shaikh. The team is well equipped, with an average of 17 years of portfolio management experience. Together, they manage a total of 32 strategies, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

People

In the past two years, DWS has been under heavy scrutiny from the SEC and German authorities owing to greenwashing allegations that were initially raised in August 2021 by the firm’s former chief sustainability officer Desiree Fixler. The SEC announced on Sept. 25, 2023, that it has fined DWS USD 19 million for failing to implement procedures to ensure that all investment staff members were following its environmental, social, and governance policies. This relates to funds where ESG factors were analyzed alongside other financially material factors, but where managers retained discretion over ESG outcomes. In addition, the firm was ordered to pay USD 6 million for deficiencies in its anti-money-laundering processes that were uncovered in a separate investigation. The investigation by the German authorities into the firm's ESG disclosures is still ongoing.  
The SEC findings underline that despite strong senior management commitment, it takes a considerable amount of time and resources to embed sustainability across all levels of an organization for firms without a long-standing sustainability heritage. Overconfidence and failure to deal with internal criticism adequately appear to have contributed to DWS' misleading statements on ESG matters. While it's difficult to quantify the financial damage to clients and no misstatements were detected in financial disclosures or prospectuses, we believe the firm’s shortcomings have the potential to adversely affect investor outcomes. Hence, we welcome DWS' efforts to strengthen governance around ESG integration and communicate more conservatively about its ESG capabilities.
Questionable and unsteady leadership has contributed to the DWS' woes. Previous CEO Asoka Woehrmann, who had spearheaded the firm's ESG push, stepped down in June 2022 as a result of the ESG investigations. His credibility had already been harmed following his use of personal email for business purposes and a large payment made to him by a client when he was head of Deutsche Bank's private-client business before being appointed as DWS' CEO in 2018. His successor Stefan Hoops is the firm's sixth CEO in the past 10 years, highlighting the instability in the firm's top leadership. This appointment also shows the continued influence of its parent company, even after the partial IPO in 2018. Hoops has spent most of his career at Deutsche Bank but has no asset-management background.
Despite all these negative headlines and shaky leadership, DWS has managed to remain quite stable in its investment ranks. The firm has also made strides to gain greater independence. For example, since 2020, bonuses have been linked to the firm's own performance rather than to that of the bank as a whole, which supports alignment and talent retention. Variable remuneration takes into account performance of up to five years.
DWS' vast fund lineup covers all asset classes, including passive strategies, which are offered under the Xtrackers brand. Many offerings don't distinguish themselves, but there are genuine areas of strength among active strategies, and fees are competitive across many funds. While the product development process has been streamlined, and although the firm has launched new strategies at a slower pace, lineup turnover remains a concern as a culture of asset-gathering prevails. New offerings are partly related to an expansion of ESG capabilities, but the firm is also building out its thematic equity, multi-asset, alternatives, and exchange-traded fund range. 
At this stage, we continue to believe that DWS' strengths justify a Parent Pillar rating of Average despite several weaknesses in its stewardship practices, but we will closely monitor the company for further disruption.

Average

Parent

Xt EAFE Div Yld Shs

HDEF tracks a cap-weighted index of developed country stocks, ex-North America, selected by quality and dividend factors.

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Dividend stocks, including REITs and utilities, have underperformed in recent years. Rising interest rates and increasing costs of capital have contributed to the underperformance. The beginnings of a strong dividend stock rally may have just begun on the back of some very good news.

Very Good News For Dividend Stocks

Xtrackers MSCI EAFE High Dividend Yield Equity ETF holds 124 international stocks with above-average yield and quality characteristics.

HDEF: Attractive Valuation, But Lagging Peers For Over 7 Years

The market's character has changed following the November FOMC meeting, forecasting better business in the next 12-24 months. The MSCI EAFE High Dividend Yield Equity ETF provides a well-defended supply of income with a 4-6% distribution yield. HDEF offers global diversification, stable yield, low volatility, and high-quality assets for investors seeking investment income with a long-term horizon.

HDEF: Sensible For Capital Placement And Long-Term Investment Income

MSCI EAFE High Dividend Yield Equity ETF picks global stocks with above-average dividend yield and quality characteristics. The portfolio is well-diversified across countries, sectors and holdings. HDEF has outperformed at least 4 competitors in the last 12 months and has the best dividend growth rate.

HDEF: Outperforming Competitors In 2023

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The Fed recently released minutes from the June meeting of the Federal Open Market Committee (FOMC), revealing a debate among officials regarding a potential interest rate hike.

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Amanda Rebello, head of Xtrackers sales U.S onshore at DWS, told NYSE's Judy Shaw at Exchange 2023 that for investors, income “has been relevant for the last couple of months and continues to be relevant.” “Equities need to work much harder just in light of the extra risk that we're taking,” Rebello said.

NYSE's ETF Leaders: Income and DWS' Amanda Rebello

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Investing in dividend-paying stocks has proved to be a helpful strategy, outperforming global markets over the long term. Dividend income strategies play an important role for multi-asset income portfolios. But they can also run the risk of being too narrowly focused, which can limit both income potential and upside participation when equity markets rise.

Dividend Investing: Broader Is Better For Multi-Asset Strategies

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Stocks paying higher dividends showed their mettle during a challenging 2022: the S&P 500 High Dividend Index declined only a modest –1.1% even as the S&P 500 tumbled –18.1%. In our view, much of the volatility in high-dividend strategies, broadly speaking, comes down to portfolio design choices, which can create very different characteristics.

Taming Biases In High-Dividend Equity Strategies

HDEF is a global dividend ETF with a 5% yield. The U.K. is the heaviest country in the portfolio.

HDEF Vs. 4 International Dividend ETFs

While the S&P 500 is up 5% year-to-date, the index lost more than 18% in 2022. And even though inflation has come down from its 9.1% peak in June, prices are still high, which means that the Federal Reserve will likely continue raising interest rates.

Gain Income from Dividend Stocks With HDEF and SNPD

International developed market equities have long been a source of consternation for advisors and investors, but dividends have somewhat eased that pain. Now, with many market observers wagering that 2023 will be a year in which value stocks and international equities outperform, there could be new life for ex-U.S.

Hone in on HDEF for International Equity Compensation

HDEF favors developed world dividend stocks outside the U.S. and Canada (the EAFE group) demonstrating value (another way of saying, offering higher yields) and quality characteristics. In the current iteration, it pays special attention to financials and materials; the UK, Japan, and Switzerland form the top trio amongst the variety of developed markets represented.

HDEF: High-Yield Dividend ETF With FX Risks In The Mix

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This has been a terrible year for global markets. Still, some ETFs breezed past the S&P 500.

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Record-high inflation, rising interest rates, bouncy markets, and the looming threat of a recession have led many investors to be more defensive when it comes to their investments.

Consider a High-Dividend Yield Approach With HDEF

HDEF is an international, large cap, high yield fund. 48% of asset value is in 3 countries: the U.K., Japan and Switzerland.

HDEF: 6.5% Yield ETF Lagging Its Competitors

The Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF) is a strong offering for periods when the U.S. dollar is strengthening.  The U.S. dollar has strengthened significantly in tangent with the Federal Reserve raising interest rates to combat high inflation.

Hedge Out Currency Exposure With HDEF

Xtrackers MSCI All World ex US Hedged Equity ETF

Xtrackers MSCI Emerging Markets Hedged Equity ETF

Xtrackers MSCI Europe Hedged Equity ETF

Xtrackers MSCI Eurozone Hedged Equity ETF

Xtrackers MSCI Germany Hedged Equity ETF

Xtrackers MSCI Japan Hedged Equity ETF

International currency moves will impact investors' foreign equity allocations, but investors can turn to currency-hedged exchange traded fund strategies to mitigate the foreign exchange risks and provide a purer play on the underlying overseas markets. In the upcoming webcast, A Strategy to Thrive in a Strong U.S.

Currency Hedged ETFs Could Help Better Manage Your International Market Exposure

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International high dividend exchange traded fund strategies can potentially help investors diversify and generate steady yields. In the recent webcast, Rates Rising?

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As headwinds at home grow stiffer, investors are starting to turn to overseas markets to source income. On average, international high-dividend stocks have posted higher yields than U.S.-based ones every year since 1999.

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The year 2022 bodes well for international equity ETFs, though mostly in the dividend segment.

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In the last few weeks, money has started to flow out of European ETFs. For investors who want to stay in, currency hedging is key.

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China equities, ESG, and high dividends have been dominating the inflows the past month for ETF provider DWS. Here are three funds investors should take notice of.

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Getting international diversification can bring yield-starved investors better fixed income options compared to safe haven domestic bonds, but it's also a good idea to hedge against currency risk when looking overseas. Enter the Xtrackers MSCI EAFE High Dividend Yield Equity ETF (HDEF).

Get High Dividend Exposure with the HDEF ETF

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News for Xt EAFE Div Yld Shs ETF (HDEF)