Emerging markets dividends shouldn’t be overlooked by equity income investors. In fact, payouts in developing economies are following developed markets higher this year.
That growth highlights the allure of various exchange traded funds, including the Guinness Atkinson SmartETFs Asia Pacific Dividend Builder (ADIV). To be clear, ADIV, as its name implies, focuses on Asian equities, excluding Japanese stocks, and it blends developed and emerging markets fare.
Still, the actively managed fund is levered more than adequately to some compelling growth trends for emerging markets dividends.
“Aggregate dividends from MSCI Emerging Market Index (MSCI EM) are expected to continue its growing trajectory in FY 2021, with mainland China to continue the lead in aggregate payouts, mainly attributable to the steady performance of the banking sector,” according to IHS Markit.
The research firm says that payouts in the MSCI Emerging Markets Index are on pace to jump 21.4%. That’s relevant to ADIV investors because the ETF allocates 57% of its weight to developing Asian economies.
China leads the way at 31%, and that’s important not only because China is the biggest emerging markets dividend payer in dollar terms, but also because banks and real estate companies are two of the largest dividend-paying groups in the world’s second-largest economy. Those sectors combine for 18% of ADIV’s weight.
However, sources of burly dividends vary from country to country, and that’s true in developing economies. For example, the top dividend-paying sector in both South Korea and Taiwan is technology, indicating that those countries have long runways for dividend growth without interference from governments. Taiwan and South Korea combine for 27% of ADIV’s geographic exposure. Tech stocks represent 17% of ADIV’s industry weight.
Other developing Asian economies highlighted by IHS Markit for impressive dividend growth include India and Malaysia. Those countries combine for 6% of ADIV’s weight. Thailand, ADIV’s other emerging market exposure, wasn’t mentioned by the research firm.
The top developed market allocation in ADIV is Australia at 12%, which is meaningful because banks and mining companies are leading a dividend revival in the country.
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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.