Emerging Market ETFs with a Dividend Focus
July 13th at 3:14pm by Tom Lydon
A dividend-oriented equity portfolio has helped investors generate higher total returns, and the same principal can be applied to a diversified international portfolio that includes emerging market exchange traded funds.
“The typical arguments for dividend investing also apply to the emerging markets,” writes Morningstar analyst Patricia Oey. “Dividends are the largest contributors to total return for investors over the long term and can also signal effective management and healthy fundamentals.”
Some emerging market dividend ETFs include:
- WisdomTree Emerging Markets Equity Income (NYSEArca: DEM): 0.63% expense ratio; 4.19% 12-month yield
- SPDR S&P Emerging Markets Dividend (NYSEArca: EDIV): 0.61% expense ratio; 6.81% 12-month yield
- EGShares Low Volatility Emerging Markets Dividend ETF (NYSEArca: HILO): 0.85% expense ratio; 4.92% 12-month yield
- iShares Emerging Markets Dividend ETF (NYSEArca: DVYE): 0.49% expense ratio; 4.06% 12-month yield
- EGShares Emerging Markets Dividend Growth ETF (NYSEArca: EMDG): 0.85% expense ratio
The WisdomTree DEM ETF weights company holdings based on dividends paid over the past year. Consequently, the fund has a follows a relatively high-yield methodology that tilts toward large-cap stocks and a slight value tilt. No individual holding makes up more than 5% of the overall portfolio, and sectors are capped at 25% – financials is the largest sector at 24.8%. Top country allocations include Russia 18.6% and China 16.3%.
The SPDR EDIV ETF tracks 100 high-dividend-yielding companies out of the emerging markets that have shown positive three-year earnings growth. Holdings are weighed by annual dividend yield, which is different from DEM, which weights companies based on total dividends paid. The ETF has a heavy 19.3% allocation toward utilities, followed by 17.3% in financials. Additionally, Brazil and Taiwan account for 22% and 20%, respectively.
The EGShares HILO ETF is a dividend yield weighed emerging market fund that also has a low-volatility tilt. The fund tries to provide high income and show less volatility than the MSCI Emerging Markets Index. This ETF has a larger exposure to the consumer goods sector at 20.8% and leans toward South Africa 21.1% and Turkey 17.0%. [Emerging Market Dividend ETFs for Yield and Lower Risk]
The iShares DVYE ETF follows 100 top dividend paying emerging market stocks, weighted by dividend yield. Additionally, the fund includes screens such as a 12-month EPS, annual dividend yield, dividend history, float-adjusted market-cap, and three-month daily average trading volume. Sector allocations are more evenly spread, with top holdings in financials and basic materials. Taiwan makes up a hefty chunk of the portfolio at 29.2%, followed by Brazil at 14.0%.
The EGShares EMDG ETF launched earlier this month. The fund includes picks out of the FTSE Index and holds companies that have posted positive earnings per share over the past year and paid dividends for each of the past five years. “Only companies with high dividend quality, including a minimum level of dividend growth, are considered for EMDG’s index,” according to Morningstar analyst Robert Goldsborough. The fund has a 20.1% allocation in financials and leans toward China 19.5% and South Africa 17.0%. [New Emerging Markets Dividend ETF Debuts Monday]
For more information on the developing economies, visit our emerging markets category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.