Conventional wisdom is a byproduct of groupthink that presents solutions good enough for the average person while simultaneously not being right for any individual. You follow it at your peril. Each Monday I will challenge the investing norms that just may be holding you back from living the life you want.

Unconventional wisdom: Do these ETFs solve my Aussie dividend concerns?

There are no solutions; there are only trade-offs."

— Thomas Sowell

I’ve spent the last several years building up positions in two Aussie share ETFs – Vanguard Australian Shares High Yield ETF (ASX: VHY) and VanEck Australian Equal Weight ETF (ASX: MVW).

Even though I think they both are solid choices given my goals and investment strategy I do have some concerns about the overall dividend environment in Australia. As a result, I’m looking to add an ASX listed global ETF to my portfolio.

I am considering the State Street SPDR Global Dividend ETF (ASX: WDIV), Betashares S&P Global High Dividend Aristocrats ETF (ASX: INCM) and Vanguard International Shares High Yield ETF (ASX: VIHY).

I’m transparent about my own portfolio not because I think anyone should replicate what I’m doing. The holdings in my portfolio are a product of my personal circumstances and preferences. Yours are likely different and your portfolio should be different.

Instead I’m sharing my own approach because the foundation for investing success is creating a framework that connects your circumstances and goals to the criteria you use to select investments. The lesson is in the process and not the outcome.

My goals and strategy

My goal is to find the best global income ETF for me. That is very different from declaring something the ‘best’ income ETF. The context of what I’m trying to accomplish forms the foundation of my process.

My goal is to generate a stream of passive income that grows faster than inflation. I’m looking for companies with sustainable competitive advantages, strong finances and a history of growing dividends.

I’m more of an income growth investor than pure income investor. Given my age I still have – hopefully – a long runway to compound income.

The dividend yield is important to me but so are the prospects for long-term dividend growth. I try to balance both when picking investments.

I want the holdings in my portfolio to have a high probability of success – as I’ve defined it – even if that means giving up the opportunity for some upside through capital gains.

I believe that fundamentals drive long-term returns. If I can find companies who can compound earnings and dividends over decades capital appreciation will take care of itself.

State Street SPDR Global Dividend ETF

The first ETF I’m exploring is WDIV. This ETF is the longest tenured ETF of the three with an inception date of 1 November 2013. The ETF tracks the S&P Global Dividend Aristocrats Index. To be eligible for inclusion a share needs to be listed in a developed market and meet some additional criteria to ensure shares have enough liquidity.

But I’m not here to assess the liquidity criteria. Time to get to the good stuff.

To be considered for inclusion a share must have increased dividends for 10 consecutive years. This meets my criteria of having a long track record of dividend growth.

Companies with dividend yields over 10% are excluded as are companies with dividend payout ratio higher than 100% or lower than 0%. The intention for this set of criteria is to avoid dividend traps.

Dividend yields above 10% generally occur when share prices have fallen significantly. This is a sign that investors do not believe the dividend is sustainable and the company is going through some form of distress. I think this is a sensible exclusion.

Excluding dividend payout ratio over 100% eliminates companies that are paying more in dividends than their earnings. A dividend payout ratio below 0% indicates a company is losing money. I’m happy with this set of criteria as well.

On an annual basis all of the shares that meet the criteria are identified. They are then ranked based on their indicated dividends. Global dividends generally work differently than in Australia and indicated dividend may be an unfamiliar term.

In a market like the US when most dividends are quarterly the indicated dividend is the last quarterly dividend projected for the next year. This is a common sense approach to ensure the highest yielding shares are included in the ETF.

Once ranked the top 100 shares are selected for the ETF. However, caps are applied with a maximum of 20 shares per country and 35 shares per sector. This ensures the ETF is diversified geographically and by sector.

The weighting of each holding is based on the dividend yield although a cap of 3% is placed on individual holdings. Weighting the holdings by dividend yield increases the overall yield of the ETF.

Betashares S&P Global High Dividend Aristocrats ETF

INCM tracks the S&P World Ex-Australia High Yield Dividend Aristocrats Select Index. To be eligible for inclusion a share needs to be listed in a developed market and similar liquidity criteria as WDIV is applied.

The dividend criteria is also similar: 10 or more years of consecutive dividend increases, payout ratios between 0% and 100% and a maximum indicated yield of 10%.

The difference between the two ETFs is in the portfolio construction. For INCM shares are placed into twelve subgroups based on three regions – North America, Europe and Asia Pacific – and four mega sector classifications of:

  • Financials & real estate
  • Consumer discretionary, consumer staples & health-care
  • Information technology & communication services
  • Industrial, materials, energy & utilities

Within each sub-group the shares are ranked by multiplying their indicated dividend yield and market capitalisation and the top 20% are included in the ETF. The ETF can hold no less than 100 shares and no more than 200 and individual security weights are capped at 6%.

I wouldn’t blame you if your head is spinning. The regional categories and ‘mega sector classifications’ are all a bit confusing. But practically speaking there are less stringent rules capping country and sector concentration.

There is also more of an emphasis on larger companies as market capitalisation is used as an input into selecting shares. This differs from WDIV which only uses dividend yield as a ranking criteria.

I’m less enthused about using market capitalisation as selection criteria. In many cases there is a relationship between size and the other criteria I use to select shares. But in this case I think it may be detracting more from the purity of the dividend factor while increasing turnover.

There is also an argument to be made that picking the highest yielding shares is a proxy for out of favour shares that may be cheap while considering market capitalisation is more of a momentum play. My own investment strategy is more focused on out of favour shares than momentum.

Vanguard International Shares High Yield ETF

This new offering from Vanguard is quite different to the first two ETFs. The selection criteria starts with the FTSE All-World Index which contains around 4,200 large and mid-cap companies from 45 developed and emerging market countries. Emerging markets are not included in either of the first two ETFs.

Real estate investment trusts are eliminated as well as any company that did not pay a dividend over the previous twelve months. All the remaining candidates are then ranked based on their 12-month forward dividend yield.

The forward dividend yield comes from the Institutional Broker’s Estimate System which aggregates analyst forecasts. Using estimated dividends is a way of avoiding dividend traps and focusing on the future which is the only thing that matters for investors.

I like using forward yields as a basis for picking shares but I do think that the other ETFs have adequate protection from dividend traps.

Shares in the roughly top 45% of highest dividend yields will be included in the index although there are some rules about the rankings to lower turnover.

This criteria results in an ETF with far more holdings than WDIV and INCM. VIHY currently has over 1600 holdings while WDIV has around 100 and INCM around 180.

Picking an ETF

Each of the three ETFs is distinct and I believe all offer attractive attributes for different investors. I need to figure out which is best for me. The following charts provide an overview of the outcome of applying the different index methodologies. All data as of 29 October 2026.

Country allocation
Sector allocation
Market cap allocation

WDIV is globally diversified and contains a good mix of large, medium and small cap companies. The main criteria for selecting shares is a solid track record of dividend increases and dividend yield. The ETF is yielding 5.08%.

INCM has a bias for large companies built into the selection criteria and no limits on countries or sectors. That means INCM should look more like the overall market which it does – it is heavily concentrated in the US and tech shares. It also means the yield is the lowest of the three at 2.86%.

VIHY is globally diversified with mostly large companies and a moderate allocation to mid-cap shares. It has the most holdings by far as the selection criteria is less stringent than WDIV and INCM. The current yield is 3.30%.

All three have similar fees with WDIV at 0.35%, INCM at 0.39% and VIHY at 0.30%.

A factor ETF like these three dividend-oriented ETFs are always going to have turnover. In many cases higher turnover leads to higher capital gains distributions. The index methodology will play a role in turnover and it is worth exploring the impact.

VIHY does not have portfolio turnover data yet as it is relatively new. WDIV has turnover of around 43% which is high. That means that 43% of the holdings were new in the last year.

However, INCM has turnover of more than 108% which means the portfolio has completely changed in the last year. The index methodology is playing a role here.

Portfolio turnover is not a deciding factor for me with picking an income orientated ETF but more stability in the holdings is a positive.

My choice

I’ve picked WDIV for several reasons.

The selection criteria for WDIV puts an emphasis on both current dividend yield and a track record of growing dividends. Those are exactly the type of companies that I want to own. I like that emphasis on ten consecutive years of dividend increases which is why I favour WDIV and INCM over VIHY.

Dividend yield is only one component of my selection criteria but as an income investor it does matter. WDIV has the highest yield and has a track record of growing distributions each year since 2021. INCM has the lowest yield.

There is an inherent tension in income investing. Unlike the other tension in my life you can’t solve the need to make trade-offs between high dividend yields and dividend growth with a martini.

You can see this tension in Microsoft which is INCM’s largest position. I own Microsoft and since I purchased it in 2012 the dividend growth has been impressive. But when I bought it the yield was much higher than today’s paltry 0.69%. In my opinion the yield is just too low today despite my expectations for strong future dividend growth.

This tension is also encapsulated in WDIV and INCM. WDIV has a higher yield but INCM may be better positioned for growth. Given the current yields of 5.08% for WDIV and 2.86% for INCM you would need an income growth gap of 5.97% annually for INCM to provide the same level of income in a decade.

ETF trade-off

In an individual share this trade-off is more pronounced. With an ETF it is harder to make a judgement given the high turnover of both ETFs – especially INCM.

I’m also mindful of how WDIV fits into my portfolio. My portfolio is heavily weighted towards the US and to large companies. That matches the profile of INCM and I individually own four of the top ten holdings in the ETF. WDIV is more global and less concentrated in large companies. I think it complements my portfolio better.

Final thoughts

Life and investing are all about trade-offs. To make a trade-off requires prioritisation. You need to understand what is most important and what can be sacrificed. WDIV is not the perfect ETF. But if you are looking for perfection you are going to have a hard time making any investment.

It meets more of the criteria which I find important and I’m willing to overlook the potential downside of less exposure to the US tech sector.

There is often also a trade-off between growth and yield. Holding higher yielding companies may mean lower levels of dividend growth. While the holdings meet the criteria of having raised their dividends for ten consecutive years there is no measure of the size of the dividend increases. However, strong historic distribution growth for the ETF provides me with some solace.

I’m willing to bet that companies with a long history of dividend increases will continue to prioritse dividend growth in the future.

My goal was not to convince anyone else to buy WDIV. It was simply to demonstrate how to use a framework to select investments. If you can get that foundation in place you are far more likely to achieve your goals.

Questions, comments or restaurant recommendations? I can be reached at [email protected]

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What I’ve been eating

I managed to write over 2000 words on picking an income ETF. Chef Pam described the perfect dish with three words – Oyster, golden broth. The oyster is from Surat Thani which is a province in the south of Thailand. The golden broth is made of cured Yunnan ham, pumpkin and butter. The result is amazing.

Potong is a fantastic restaurant housed in a 150-year-old building in Chinatown in Bangkok. But it takes a lot of dividends to get to Thailand. The good news is Chef Pam who was named the best female chef in the world in 2025 is opening a restaurant in Sydney. I will be first in line when Sek opens in the Crown in 2027.

Oyster