Emerging markets are back in favor as investors are able to handle more risk than last year. For those investors who still want an income stream for safety, there are emerging market exchange traded funds that give exposure to overseas markets via dividend stocks.
“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,” Patricia Oey for Morningstar wrote in a fund analysis. [Top International ETFs for Dividends]
The iShares Emerging Markets Dividend Index (NYSEArca: DVYE) has appeared to be less risky than the MSCI Emerging Markets Index. The nature of emerging markets is risky during high global market volatility. The low expense ratio of 0.49% could be a deciding factor for skeptics. [Emerging Market Dividend ETFs Grab Market Share]
DVYE weights heavily toward financials, with about 6% of the portfolio allocated to technology. Taiwan and Brazil are the top-weighted countries in the fund.
DVYE is fairly new to the market, and will need time to gather assets along with a track record.
A competitor, WisdomTree Emerging Markets Equity Income (NYSEArca: DEM), features a lineup of income-earning names from countries such as Taiwan, Brazil and Turkey.
Don Dion for The Street reports that the iShares Dow Jones Select Dividend Index Fund (NYSEArca: DVY), which is a dividend focused play for U.S. companies, has outperformed DEM even in the risk-on environment seen in 2012. DEM has over $3 billion in assets. [Emerging Market Dividend ETFs]
Overall, the trend toward emerging market dividend plays is still gaining traction.
WisdomTree Emerging Markets Equity Income
Tisha Guerrero contributed to this article.