In what has been, until recently, a rough year for emerging markets equities and ETFs, investors have been reminded that getting compensated for taking on the elevated risk associated with developing economies is a good idea. ETF issuers have obliged with recent introductions that marry the emerging markets and income themes.
One of those new ETFs is the EGShares EM Dividend High Income ETF (NYSEArca: EMHD). EMHD tracks the FTSE Equal Weighted Emerging All Cap ex Taiwan Diversified Dividend Yield 50 Index, which is designed to deliver a broad basket of securities across emerging market countries that have been screened for high dividend yields. EMHD’s use of that index helped put index provider FTSE over the century mark regarding North American ETFs benchmarked to its indices. [FTSE Hits Century Mark For North American ETFs]
More important than number is 8.8%. As in the dividend yield sported by EMHD’s index, one that is noticeably higher than the yields on more widely used emerging markets benchmarks.
The index is equal-weighted and also screens for companies that have consistently delivered robust dividends to investors. EMHD has a 20.7% weight to Brazil, its largest country allocation, and a 20.3% weight to utilities, the second-largest sector weight. That might seem like a contradictory combination because Brazilian utilities dividends have declined this year.