A Quality Approach to Emerging Markets Dividends

Gazprom and Lukoil, two of QDEM’s top-10 holdings, are expected to pay at least 15% of this year’s profits in dividends. Those stocks trade at an average discount of 49% to their 10-year average P/E ratios. [Russian Stocks on the Cheap With These ETFs]

At 9%, Brazil is QDEM’s fourth-largest country allocation. Latin America’s largest economy is expected to be, on a percentage basis, the largest grower of emerging markets dividends this year.

While much has been made of the quality factor and its impact on ETF and index construction, “quality” among emerging markets dividends payers often means an encounter with large, state-run companies. Until recently, that group has not been delivering a lot in the way of quality returns.

However, as Market Vectors notes, the quality dividend factor as measured by MSCI has historically provided solid long-term returns. MSCI’s high dividend yield index features companies with a higher return on equity and lower long-term debt-to-capital ratio than the traditional cap-weighted benchmark, according to Market Vectors data.

Market Vectors MSCI Emerging Markets Quality Dividend ETF