For investors who can stomach more risk, there are exchange traded funds that invest in emerging markets and seek to provide a dividend stream on the side.
“International dividend funds pay dividends net of foreign tax withholding, which is applicable in certain countries. At the end of the year, fund companies provide tax documents, which will include foreign taxes paid, which investors can elect to take as a tax credit or as an itemized deduction, subject to certain rules,” Patricia Oey, wrote in a Morningstar analyst report. [ETFs For a Slow Growth Economy]
ETFs allow investors to capture the growth in emerging markets, without risking all of their capital on one country or sector. What’s more, there are plenty of ETFs that track emerging economies indexes made up of dividend-paying economies overseas. Dividen -paying companies have cash to grow and don’t need to issue new stock to raise capital, which could take value away from shares already trading. [ETF Spotlight: High Yield Emerging Market Equities]
WisdomTree Emerging Markets High -Yielding Fund (NYSEArca: DEM) yields 7.3%, and gives the most exposure to Taiwan, South Africa and Brazil. SPDR S&P Emerging Market Dividend Fund (NYSEArca: EDIV) yields 7.2% and has top holdings in Taiwan, Brazil and Chile. Both funds rely heavily on telecommunications.
For the long term, an investment in an emerging markets dividend ETF looks positive due to ongoing new infrastructure construction, higher value manufacturing and services export and growing consumer consumption, reports Oey.