There are not many ASX-listed exchange-traded funds (ETFs) that can provide a mixture of dividends and growth. Most ETFs focused on international shares tend to have a low dividend yield. But, the Betashares India Quality ETF (ASX: IIND) seems to tick both boxes.
This fund owns 30 of the highest-quality Indian companies from the Indian stock market.
While India may not be an obvious investment choice for some investors, I think it's a compelling option for a few different reasons.
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Fast-growing economy
BetaShares, the provider of the IIND ETF, says that India's economy is one of the fastest-growing in the world, with future growth potential underpinned by strong structural fundamentals.
The International Monetary Fund is projecting that the Indian economy could grow by 6.2% in the 2025 to 2026 fiscal year.
Earlier this year, accounting and advisory outfit Deloitte wrote about the Indian economy:
Amid slowing GDP growth, demographic dividends and growing middle-class wealth are driving India's resilience in consumption, services, and more importantly, capital markets.
Deloitte also noted that the Indian economy is seeing high-value manufacturing exports significantly increase, as well as pleasing service sector growth:
…Between April and October 2024, total services exports stood at US$216 billion, compared to US$192 billion in 2023. This growth is crucial given the sector's significant contribution to India's GDP and employment, specifically for the urban middle-income population.
…Exports of electronics, engineering goods, and chemicals have grown significantly, now comprising 31% of total merchandise exports. Given that micro, small, and medium enterprises are significant contributors to manufacturing supply chains and exports, rising performance of these enterprises points to healthy growth in this export segment.
I'll also point out that India's middle class is growing over the long term, which is helping certain sectors, too.
With that sort of underlying growth, I'd say this ASX ETF is exposed to strong underlying tailwinds as it provides exposure to Indian banks, consumer discretionary businesses, industrials, IT companies, and consumer staples.
Businesses are only chosen for this portfolio if they are among the 30 highest-quality businesses on the Indian stock exchange. Quality is judged based on three factors: high profitability, low leverage, and high earnings stability.
Dividend yield
Now let's look at the dividend yield of the IIND ETF. Due to the relatively low valuation of the businesses involved, the fund is able to provide a pleasing distribution yield to investors.
According to BetaShares, as at 30 May 2025, the fund offered a distribution yield of 3.3%. Considering the long-term earnings growth of the underlying businesses, I think this is an appealing starting yield for investors.
Good total returns by the ASX ETF
I believe earnings growth is a powerful tailwind for helping raise the share prices of businesses, including, collectively, the businesses that are part of the IIND ETF portfolio. The fact that they have a high level of profitability and high earnings stability is pleasing and perhaps reassuring for a market that's less well-known to Aussies focused on the ASX or US share markets.
In the five years to 30 May 2025, the IIND ETF has delivered an average return per year of 12.7%. I believe it has good potential to outperform the S&P/ASX 200 Index (ASX: XJO) over the long term. Hence, I think this ASX ETF is one of the most intriguing on the ASX as a way to diversify a portfolio.
