The WisdomTree Middle East Dividend Fund (NasdaqGM: GULF) merits consideration in the conversation about emerging markets dividends and accessing those dividends via exchange traded funds.
A 4.25% dividend yield for the WisdomTree Middle East Dividend Index (WTEMME), GULF’s underlying index, and a 5.66% 30-day SEC yield for the ETF itself prove as much. Those are arguably gaudy numbers to be sure, but more important are the factors driving GULF’s dividend growth and rising payouts in Middle East emerging and frontier markets.
“While WisdomTree doesn’t have an Index purely focused on frontier markets, Middle East Dividends has been generating truly differentiated performance compared with emerging markets. Its biggest divergence from other broad-based, frontier market exposures is the exclusion of Nigeria,” according to recent research by WisdomTree’s Jeremy Schwartz, CFA, Director of Research, Christopher Gannatti, CFA, Associate Director of Research, Tripp Zimmerman, CFA, Research Analyst & Eswarie Subrahmanyam S. Balan, Research Analyst.
Comparisons have been drawn between GULF and the iShares MSCI Frontier 100 ETF (NYSEArca: FM), primarily because prior to MSCI’s promotion of Qatar and the United Arab Emirates to emerging markets status, the two ETFs featured some of the largest allocations to those nations. However, GULF is not a dedicated frontier or emerging markets fund. [Investors Flocking to ETFs With Qatar, UAE Exposure]
Due to its focus on the Middle East and the fact that is not obligated to follow market classification changes, GULF does not include Nigerian and that is not a bad thing at a time when oil prices are tumbling. [Oil Drags Nigeria ETF Into Bear Market]
As of Nov. 14, Qatar, UAE and Kuwait combined for nearly 79% of GULF’s weight. From GULF’s May 2013 rebalance to its most recent rebalance at the end of the third quarter, the ETF’s exposure to Kuwait and the industrial sector rose.
“Kuwait (+2.9%) and Industrials (+3.5%) saw the biggest increases in weight. The driving factor is that these segments of the market significantly underperformed Middle East Dividends, and the relative value nature of the rebalance repositioned weight in underperforming areas,” according to WIsdomTree.
At the country level, Egypt and Morocco were pared within GULF. Earlier this year, Russell Investments demoted Egypt to frontier status while S&P Dow Jones Indices levied the same demotion on Morocco last week. Those countries combine for 12.6% of GULF’s weight. [S&P Demotes Morocco to Frontier Status]
Data from WisdomTree show that countries that underperformed following GULF’s previous rebalance now account for 64.5% of the underlying index, up from 61.8% while outperforming countries saw their weight reduced to 35.5% from 38.2%.
GULF, which charges 0.88% per year, has nearly doubled in size this year, pulling in $25.1 million of its $56.1 million in assets under management since the start of 2014.
WisdomTree Middle East Dividend Fund