With the world’s stock markets showing weakness recently, one strategy for investors to cushion the fall and still allow for the potential of capital appreciation is to invest in dividend-paying stocks. The yields on such stocks have been on the rise lately and the advent of exchange-traded funds (ETFs) now lets you make one investment to gain the benefit of diversification through an array of international holdings.

A fund that you can use to tap the increased yield of stocks is WisdomTree Global Equity Income Fund (DEW). The ETF, previously named WisdomTree Europe Equity Income Fund, seeks investment results that closely correspond to the price and yield performance, before fees and expenses, of the WisdomTree Global Equity Income Index.

Despite the new name, the fund’s focus of letting investors buy dividend-paying stocks that are mostly outside of the United States remains intact. As a dividend-paying fund, DEW actually offers a nice yield. The fund currently lists a standardized yield of 4.37%. With banks and government bonds paying far lower interest rates, DEW is attractive for its capital appreciation opportunity and its enticing yield. Indeed, average dividend yields for European stocks are higher than the rates paid on government bonds for only the third time in the last 30 years, The Wall Street Journal reported in an Aug. 7 article, “Europe’s Eye-Catching Dividends.”

The chart below shows that DEW is rebounding, after pulling back recently. The obvious question is whether the recent upswing will continue. If it does, DEW will be a nice investment that will provide capital appreciation from increases in its share price, as well as income from the dividend payments. You win both ways.

If the fund’s share price pulls back again with the rest of the market, you will be cushioned somewhat because dividend-paying investments typically hold their value better than non dividend-paying stocks. Even if the market takes time to recover, you still receive dividend payments while you wait, if you decide to hang onto the fund for awhile.

Of course, public companies that pay dividends sometimes cut or reduce them. With an ETF, you are protected from 100% of your portfolio eliminating dividend payments at the same time. Companies typically try to avoid reducing their dividends and certain companies that generate strong cash flow are unlikely to need to take such actions, even in an economic slowdown.

The fund also offers a variety of investments to reduce investor risk. The largest percentage of its holdings in any one company is 2.17% in AT&T, as of Aug. 16. The other top four holdings of the fund on that date were: Total SA, 2.06%; Vodafone Group PLC, 1.85%; Telefonica SA, 1.77%; and France Telecom SA, 1.65%. DEW’s biggest sector concentration, also on Aug. 16, was financials, 23.1%, followed by telecommunications services, 18.7%; utilities, 13.06%; healthcare, 10.49%; and consumer staples, 8.67%. Among its country holdings on that date, the United States accounted for 20.41%; France, 13.26%; the United Kingdom, 12.8%; Australia, 8.94%; and Spain, 6.61%.

If you want advice from me about which ETFs to buy and to sell, I encourage you to sign up for my ETF Trader service by clicking here. As always, I am pleased to answer any of your questions about ETFs, so do not hesitate to contact me if you have one. To send your question to me, simply click here. You may just see your question answered in a future ETF Talk.