Emerging markets stocks and corresponding ETFs are rebounding this year and data confirm plenty of investors are revisiting the asset class. For conservative investors looking to limit some of the volatility associated with emerging markets, dividend strategies can help accomplish that objective.
An ETF to consider on that front is the ProShares MSCI Emerging Markets Dividend Growers ETF (CBOE: EMDV). EMDV is higher by nearly 7% this year.
EMDV follows the MSCI Emerging Markets Dividend Masters Index, which targets MSCI Emerging Market components that have increased dividend payments each year for at least seven consecutive years.
“Emerging market equities saw mixed performances in February, with stocks in Asia faring better than stocks in Latin America and emerging Europe, which underperformed,” according to Franklin Templeton.
Half of EMDV’s top 10 country weights are Asian nations, including a 29.34% weight to China. China, the world’s second-largest economy, has long been a primary driver of emerging markets dividend growth.
Reasons To Be Bullish on Emerging Markets
Some data points indicate emerging markets equities are primed for more upside, which would benefit EMDV.
“A global benchmark for emerging markets is set to surge as much as 8 percent this year, according to Morgan Stanley,” reports CNBC. “The investment bank said in a report that the MSCI Emerging Markets Index is likely to be driven higher by additional stimulus from Beijing and bullishness on Chinese shares, among other factors. Chinese stocks make up 32.12 percent of the index”
India and South Africa combine 35.35% of EMDV’s geographic exposure. While South Africa has been a laggard emerging market this year, Indian stocks are rallying ahead of elections there.
“Morgan Stanley said investors who want to ride the rally should look at China, India, Indonesia, Singapore and Brazil,” according to CNBC. “Other reasons for a more rosy emerging markets outlook include better-than-expected corporate earnings in the region, said the bank.”
Indonesia is EMDV’s sixth-largest country weight at 4.70%.
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