LVHI: A Defensive Anchor for High-Yield International Investors in Volatile Markets

Investors seeking steady income and protection against market turbulence often turn to defensive assets. Among them, the Franklin International Low Volatility High Dividend ETF (LVHI) stands out as a compelling option. Designed to deliver high dividend yields while minimizing exposure to currency fluctuations and market volatility, LVHI offers a unique blend of income generation and risk mitigation. Here's why it deserves a place in today's portfolios.

The Dividend Advantage: Yield Without Overexposure

LVHI's dividend yield of 6.32% (as of June 2025) dwarfs its category average of 0.74%, making it a standout for income-focused investors. This yield stems from its focus on low-volatility, high-dividend stocks in developed markets outside the U.S. Recent data shows the ETF increased its annual dividend rate to $1.24 per share in June 2025, a >3% hike from prior levels.

The fund's strict diversification limits—no single stock exceeds 2.5% of holdings, and sectors are capped at 25%—ensure investors aren't overexposed to any one company or industry. This structure reduces the risk of dividend cuts, a common pitfall in high-yield strategies.

Currency Hedging: A Shield Against Exchange Rate Risks

One of LVHI's most powerful features is its currency hedging methodology, which uses forward contracts to neutralize exposure to exchange-rate fluctuations. In a world where the U.S. dollar's strength can erode returns on international investments, this hedging mechanism has proven effective.

The fund's beta of 0.56 underscores its low sensitivity to broader market swings. During the 2022 market downturn, LVHI fell just -3.6%, faring far better than its category average of -22.8%. This resilience positions it as a recession-resistant tool for portfolios.

Geographic and Sector Diversification: Broad Yet Balanced

LVHI invests in 19 countries, with top exposures to Europe (57.61%) and Japan (15.43%). Its sector allocations favor stable industries like utilities (11.96%), financials (26.29%), and healthcare, avoiding overconcentration in volatile sectors.

This diversification shields investors from regional economic downturns. For instance, its holdings in companies like Enel SpA (Italian utilities) and Mitsubishi Corp (Japanese conglomerate) balance exposure to both developed and emerging economies.

Performance: Outperforming Over the Long Term

LVHI's track record speaks volumes. Over the past year, it delivered a 21.83% return, handily beating its category average of 18.48%. Over three years, its 14.91% annualized return trounces the 6.24% category average, proving its strategy works in both rising and falling markets.

The ETF's low expense ratio (0.40%) further adds value, as it avoids the high fees that plague many actively managed funds.

Risks to Consider

No investment is without risk. LVHI's hedging effectiveness hinges on accurate forward contracts, which may underperform if currency predictions miss. Additionally, while dividend cuts are rare among its holdings, they could occur during a severe economic downturn. Investors should also note its moderate ESG score (7.52/10), which may not align with all sustainability-focused portfolios.

Why Invest Now?

In a market characterized by geopolitical tensions, interest rate uncertainty, and currency volatility, LVHI offers a defensive bulwark. Its high yield, hedging, and diversification make it ideal for:
- Income seekers looking for payouts 8x higher than the category average.
- Risk-averse investors who want exposure to international markets without exchange-rate risk.
- Long-term holders who can tolerate moderate price swings for steady growth.

Final Take

LVHI is more than an ETF—it's a strategy. By combining high dividends, low volatility, and currency protection, it addresses three major investor concerns: income, safety, and stability. With a proven track record and a disciplined approach to diversification, it's a top contender for any portfolio navigating today's uncertain landscape.

For conservative investors seeking to weather volatility while harvesting income, LVHI is a compelling choice. As markets shift, its defensive traits could prove invaluable.

Data as of June 2025. Past performance does not guarantee future results. Always conduct thorough due diligence before investing.