Decent 2016 performances by some the largest emerging markets exchange traded funds has prompted some optimism about what the new year may have in store for this resurgent asset class.
Investors can get some compensation for betting on an emerging markets rebound in the form of dividend ETFs that are also dedicated plays on developing markets. Examining emerging markets dividend yields can prove to be an especially fruitful exercise following a year in which those yields are elevated.
The iShares Emerging Markets Dividend ETF (NYSEArca: DVYE) is one of the more notable options among emerging markets dividend ETFs. A dividend-oriented equity portfolio has helped investors generate higher total returns, and the same principal can be applied to a diversified international portfolio that includes emerging market exchange traded funds.
DVYE follows 100 top dividend paying emerging market stocks, weighted by dividend yield. Additionally, the fund includes screens such as a 12-month EPS, annual dividend yield, dividend history, float-adjusted market-cap, and three-month daily average trading volume.
DVYE “has been designed by its managers to offer investors exposure to a broad range of established dividend-paying companies from countries such as Taiwan, China, Brazil, Thailand, Malaysia, Turkey, and Poland. The fund had a 30-day SEC Yield of 5.68% as of November 2016, and it carries a reasonable expense ratio of 0.49%,” according to Investopedia.
Emerging markets dividend growth has outpaced developed world payout growth over the past decade and market observers expect that trend to continue, but some advisors and investors gloss over emerging markets dividend exchange traded funds. However, that growth came under pressure last year as commodities prices slumped.
When share prices 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.
Over the past few months, foreign investment flows into emerging market stocks surged, despite any notable changes to the growth, dividends and corporate earnings in the developing economies.
Currently DVY’s “chart is a textbook example of how active traders would expect the price to behavior near this long-term indicator. Notice how the price provided support on each attempted pullback following the breakout in April 2016. Traders would expect this type of support to continue and will likely set their stop-loss orders below $33.63 in the case of a shift in sentiment,” according to Investopedia.
For more information on dividend stocks, visit our dividend ETFs category.
