The recent round of positive dividend news centers largely on U.S. stocks, but investors shouldn’t sleep on rising payouts in other parts of the world.
Data confirm emerging markets payouts are perking up in a big way, meaning it could be an opportune time for investors to revisit exchange traded funds such as the ALPS Emerging Sector Dogs ETF (NYSEArca: EDOG).
The third-quarter reading of the Janus Henderson Global Dividend Index confirms the allure of the emerging markets dividend opportunity, potentially giving investors reason to evaluate EDOG. In the September quarter, headline payout growth in developing economies was 31%, according to the index. That’s nearly triple the dividend growth rate of 10.5% in North America. In Asia ex-Japan, a region including plenty of emerging markets, dividends surged 37.9%.
EDOG, which tracks the S-Network® Emerging Sector Dividend Dogs Index, features exposure to six Asian economies. Led by Thailand, those countries combine for almost half of EDOG’s geographic weight.
“China’s big dividend season takes place in the third quarter. Payouts rose to $32.6 billion, an increase of 15.7% on an underlying basis, putting Chinese companies on track to deliver record dividends this year for the second year running,” according to Janus Henderson.
EDOG also has some right place, right time sector allocations with which to capitalize on new-found emerging markets dividend ebullience.
“The lifting of constraints on banking dividends, along with lower-than-expected loan impairments, and hence higher profits, pushed overall payouts from financials up by a third on an underlying basis. Collectively they accounted for a quarter of the Q3 total,” adds Janus Henderson.
Another source of global dividend strength, including emerging markets, is the energy sector, a group EDOG has ample exposure with the help of a 10.7% weight to Russia. Financial services and energy stocks combine for almost 20% of EDOG’s roster.
In the third quarter, seven of the world’s top 20 dividend payers were companies based in developing economies. That’s the same amount on that list hailing from the U.S. EDOG yields 3.03%. That’s more than double the trailing 12-month yield on the MSCI Emerging Markets Index.
Other emerging markets dividend ETFs include the ProShares MSCI Emerging Markets Dividend Growers ETF (CBOE: EMDV), the iShares Emerging Markets Dividend ETF (DVYE), and the WisdomTree Emerging Markets Equity Income Fund (NYSEArca: DEM).
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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.
