It has been a tough year for emerging market ETFs but some funds that focus on dividend-paying stocks and the consumer sector have helped limit the damage.
The diversified iShares MSCI Emerging Markets (NYSEArca: EEM) is down about 5% year to date even though the ETF has shown some signs of life the past month.
Meanwhile, EGShares Emerging Markets Consumer ETF (NYSEArca: ECON) has managed to post a positive return in 2013. The ETF has also outperformed broad emerging market benchmarks the past three years. [Consumer Focus Powers Emerging Market ETF’s Outperformance]
Charles Sizemore at Sizemore Capital Management LLC says he uses ECON in his portfolios because it gives better access to the emerging market consumer.
“The underlying companies get about 90% of their revenue from selling within their home markets and to other emerging markets,” he writes for MarketWatch.
“But there are other ways to slice and dice the emerging markets universe, such as by dividend yield,” Sizemore added, citing research that high-dividend stocks outperform by a wide margin in developing markets.
ETFs that focus on dividends include WisdomTree Emerging Markets Equity Income Fund (NYSEArca: DEM) and EGShares EM Dividend High Income ETF (NYSEArca: EMHD). [New Dividend ETF for Emerging Markets]
Full disclosure: Tom Lydon’s clients own EEM and DEM.