With emerging markets equities continuing to tumble, it would be reasonable to expect high dividend yields, but that is not always the case. For example, the MSCI Emerging Markets Index, one of the most widely followed gauges of developing world equities, yields just 2.47% on a trailing 12-month basis.
As share prices have tumbled for emerging markets energy and materials firms, some have slashed dividends due to weakening balance sheets. Additionally, some major emerging markets banks are under pressure, indicating that rising dividends from that group may be hard to come by. Those scenarios mean investors need to place a premium on locating reliable emerging markets dividend growth.
The new ProShares MSCI Emerging Markets Dividend Growers ETF (BATS: EMDV) can help with that objective. EMDV is the sixth ETF in the ProShares lineup of dividend growers funds, which includes the popular ProShares S&P 500 Aristocrats ETF (NYSEArca: NOBL).
The ProShares MSCI Emerging Markets Dividend Growers ETF follows the MSCI Emerging Markets Dividend Masters Index, which “targets companies that are currently members of MSCI Emerging Markets and have increased dividend payments each year for at least seven consecutive years. The index contains a minimum of 40 stocks, which are equally weighted. No single sector may compose more than 30% of the index, and no single country may compose more than 50% of the index. If there are fewer than 40 stocks with at least seven consecutive years of dividend growth, or if sector or country caps are breached, the index will include companies with shorter dividend growth histories,” according to a statement issued by ProShares.
EMDV allocates 22.6% of its weight to China and 18.8% to India. South Africa, with a weight of 14.1%, is the only other country to command a double-digit allocation in the new ETF. The new ETF offers investors exposure to more than 10 developing economies.
Financial services, typically the largest dividend payers in many emerging markets, are EMDV’s largest sector weight at just over 30%. Technology, consumer staples and consumer discretionary names combine for over 39% of the new ETF’s weight.
“Investors interested in emerging markets may want to consider dividend growers, which tend to outperform the broader market. Indeed, according to Ned Davis Research, companies within the MSCI Emerging Markets Index that grew dividends returned 14.5% compared with 5.1% for the MSCI Emerging Markets Index,” said ProShares in the statement.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.