Flat dividend growth by Russian firms will not be the undoing of DEM. Although the South African rand and Brazilian real have traded lower against the U.S. dollar since May 2013, dividend growth in those countries has still been positive in dollar terms, an important factor because South Africa and Brazil combine for nearly 21% of DEM’s weight. [Emerging Markets Dividend ETF Keeps Emerging]
Dividends and Russia also give DEM a value feel. The MSCI Russia Index trades at around five times earnings compared to 13 times for the MSCI Emerging Market Index. Conversely, the WisdomTree Emerging Markets Equity income Index, DEM’s underlying index, trades at 9.46 times earnings, according to issuer data.
Not to mention, DEM’s distribution yield of 4.12% is almost 200 basis points higher than the trailing 12-month yield on EEM.
“EM high-dividend stocks are currently the cheapest part of global equity markets on a dividend yield and P/E ratio basis. But these stocks have high sensitivity to China’s growth rates and oil prices—two unknowns entering 2015. If oil prices rebound, I believe the EM high-dividend payers will be the biggest beneficiaries,” said WisdomTree Research Director Jeremy Schwartz in a research note out last month.
WisdomTree Emerging Markets Equity Income Fund
Tom Lydon’s clients and Todd Shriber own shares of DEM.