• Bottom Contributors Are Still Performing Positively: It speaks to a strong shift in sentiment when even the markets that are detracting from Dividend Growth’s relative performance against the MSCI EM are performing positively. During 2013, positive performance across emerging markets was tough to find, but thus far in 2014, that picture has shifted. India deserves special mention here—especially with the strong equity performance following the recent election. Its 4.0% average weight in 2014 may not seem like much, but across WisdomTree’s broad-based emerging market Indexes focused on dividend payers, it is actually the highest exposure to India available.3 Dividend Growth captures qualifying Indian equities because they tend to have above-average long-term earnings growth expectations as well as above-average measures of ROE and ROA. The only thing they don’t have is high levels of cash dividends, which explains how the 4.0% average weight is still well below the weight in the MSCI EM over the same period.
The Case for Future EM Dividend Growth
Even though uncertainty may roil emerging market equities, concepts like “dividend growth” and “quality” tend to remain attractive to investors. The fact that the MSCI EM has over 95% of its weight in firms that have paid at least one dividend in the past twelve months is a testament to the fact that emerging markets provide a rich hunting ground for dividend payers.4 WisdomTree’s unique selection criteria provide a more precise focus on firms with potential to deliver ongoing dividend growth through a focus on growth (long-term earnings growth expectations) and quality (three-year average ROE and ROA). While volatility similar to what was seen in 2013 can be an ever-present risk, we are very excited about the potential for this Index over the medium to long term and look forward to seeing what it can do over the coming market cycles.
1Specific period is 12/31/13 to 5/23/14.
2Source: Bloomberg, for 12/31/12 to 12/31/13.
3Sources: WisdomTree, Bloomberg, as of 5/23/14.
4Source: Bloomberg, for 12-month period prior to 4/30/14.
Important Risks Related to this Article
Investments in emerging, offshore or frontier markets are generally less liquid and less efficient than investments in developed markets and are subject to additional risks, such as risks of adverse governmental regulation and intervention or political developments. Dividends are not guaranteed, and a company’s future ability to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time.Performance, especially for very short time periods, should not be the sole factor in making your investment decision.