Approximately 140 exchange traded funds offer some exposure to Brazil, Latin America’s largest economy. There are the well-known country-specific options such as the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) and popular diversified emerging markets funds such as the iShares MSCI Emerging Markets ETF (NYSEArca: EEM).
Then there are regional ETFs such as the iShares Latin American 40 ETF (NYSEArca: ILF) and the SPDR S&P Emerging Latin America ETF (NYSEArca: GML) that are also Brazil ETF. [Loving LatAm ETFs Again]
Due to one of the more favorable dividend policies in the developing world, Brazil also occupies premier spots in select emerging markets dividend ETFs, proving that investors can grab some compensation while gaining access to now-rebounding Brazilian equities.
Apparently, index providers and ETF issuers view Brazil’s dividend trajectory in a favorable light because the country is a marquee constituent in some newer emerging markets dividend growth ETFs. For example, the WisdomTree Emerging Markets Dividend Growth Fund (NasdaqGM: DGRE), which debuted last August, features Brazil as its largest country allocation at 15%. [Emerging Markets Dividends are Rising]
DGRE, which sports a distribution yield of almost 1.3%, tracks the WisdomTree Emerging Markets Dividend Growth Index (WTEMDG). That index bases component selection on long-term earnings expectations, return on equity and return on assets, all factors that can provide clues to a company’s ability to maintain and grow payouts, according to WisdomTree research.
The EGShares Emerging Markets Dividend Growth ETF (NYSEArca: EMDG) is a month older than DGRE and features a 15.5% weight to Brazil, making the country the ETF’s third-largest geographic exposure behind China and South Africa.
Helped by that Brazil exposure, EMDG gained 4.4% last month. No stock accounts for more than 3% of the ETF. EMDG’s underlying index, the FTSE Emerging All Cap ex Taiwan Diversified Capped Dividend Growth 50 Index, “measures the stock performance of 50 emerging market companies whose 5-year dividend payout growth is faster than the average dividend payout growth in the FTSE All Cap Emerging ex Taiwan Universe,” according to EGShares. The index yield is 3.73%.
Investors can dial down the volatility a bit with the SPDR S&P Emerging Markets Dividend ETF (NYSEArca: EDIV), an ETF with a 12.3% weight to Brazil. Taiwan, one of the least volatile emerging markets, is EDIV’s top country weight at 18.2%.
As is the case with so many emerging markets funds these days, EDIV can be viewed as inexpensive with a P/E ratio of just 10. The fund yields 5.1% and gained over 6% last month. [Emerging Markets ETF With a Dividend Tilt]
WisdomTree Emerging Markets Dividend Growth Fund
Tom Lydon’s clients own shares of EEM and ILF.