Emerging Market Dividend ETFs for Yield and Lower Risk
April 29th, 2013 at 6:30am by Tom Lydon
Emerging market stocks have been underperforming the broader markets so far this year, but how long will this last? Exchange traded funds linked to the developing markets are starting to gain momentum, testing their short-term moving averages.
Dividend-focused emerging market ETFs are on the rise, with the iShares Emerging Markets Dividend Index Fund (NYSEArca: DVYE) and the WisdomTree Emerging Markets Equity Income ETF (NYSEARca: DEM) both inching toward their 50-day simple moving averages. [iShares: How to Access Emerging Market Growth]
Emerging market equities have been lagging behind U.S. stocks so far this year. The S&P 500 Index has increased 11.4% year-to-date, compared to the 6.3% fall in DVYE and 4.1% decline in DEM. [Low-Volatility ETFs for Emerging Markets]
“The typical arguments for dividend investing also apply to the emerging markets. Dividends are the largest contributors to total return for investors over the long term and can also signal effective management and healthy fundamentals,” writes Morningstar analyst Patricia Oey.
The iShares DVYE follows the performance of 100 leading dividend-paying emerging market stocks, weighted by dividend yield. DVYE has a 0.49% expense ratio and a 3.82% 12-month yield.
Sector allocations include financials 18.4%, basic materials 17.9%, utilities 14.8%, telecom services 11.4%, consumer goods 10.9%, industrials 10.5%, technology 9.4%, consumer staples 3.2% and oil & Gas 3.0%.
Country allocations include Taiwan 26.8%, Brazil 15.8%, Turkey 8.5%, South Africa 8.4%, China 7.2%, Thailand 6.6%, Malaysia 6.5%, Indonesia 3.8%, Czech Republic 3.1% and South Korea 3.0%.
Next page: WisdomTree’s emerging market dividend ETF