Last year, emerging markets companies accounted for $1 of every $7 paid in dividends and payouts in developing economies have more than doubled over the past years. Where exactly that growth is coming is crucial information for investors in various emerging markets exchange traded funds.
Emerging markets dividends are expected to rise 6% this year to $238.8 billion with 60% of that growth attributable to the BRIC nations of Brazil, Russia, India and China, Verity Ratcliffe reports for the Financial Times.
China is the largest emerging markets dividend payer in dollar terms while Russia is the fastest growing, both statuses the result of policymakers there forcing cash-rich, state-run companies to payout 25% to 30% of profits in dividends. [Emerging Markets Dividends on the Up and Up]
Chinese dividend growth is expected to be a tepid 3% this year, but there could be opportunities for better growth rates in the health care, retail and real estate sectors, the FT reports, citing research firm Markit. Of the BRIC quarter, Brazil is expected to post the largest dividend growth this year. Latin America’s largest economy is forecast to grow payouts by 13.6%, or $40 billion, according to the FT.
ETF ideas for accessing emerging markets dividend dynamos include the EGShares Emerging Markets Dividend Growth ETF (NYSEArca: EMDG). EMDG is just nine months old, but in terms of exposure to Chinese and Brazilian dividend growth, the ETF delivers as those countries combine for 38% of the ETF’s weight. [Emerging Markets ETFs With a Dividend Tilt]
EMDG, which features an index yield of 3.52%, also features an almost 11% weight to Russia, meaning nearly half the ETF’s weight is devoted to three of the biggest emerging markets dividend payers.
EMDG has a rival in the form of the WisdomTree Emerging Markets Dividend Growth Fund (NasdaqGM: DGRE). Like its counterpart, DGRE is also overweight Brazil relative to the MSCI Emerging Markets Index. The WisdomTree offering has a 15.2% allocation to Brazil, making it the ETF’s largest geographic exposure. [To Brazil With Dividends]
Russia and China combine for another 18.5% of DGRE’s weight and the index yield is nearly 4%, according to WisdomTree data.
For the investor that wants a juicy yield along with the comfort of some exposure to a lower beta emerging market such as Taiwan, the $481.6 million SPDR S&P Emerging Markets Dividend ETF (NYSEArca: EDIV) merits consideration.
EDIV, which is just over three years old, sports a dividend yield of about 5%. The combination of dividends and a large allocation to lower beta Taiwan has made EDIV less volatile than diversified emerging markets ETFs that are not explicit dividend funds over the past several years. Up 9.4% in just the past month, EDIV allocates a combined 45.9% of its weight to Taiwan, China and Brazil.
SPDR S&P Emerging Markets Dividend ETF
ETF Trends editorial team contributed to this post.