There's Income to Be Had in Emerging Markets | ETF Trends

Emerging markets equities are perking up and for investors that want to revisit the asset class while generating some income, the ALPS Emerging Sector Dogs ETF (NYSEArca: EDOG) is an avenue to consider.

EDOG, which debuted over six years ago, tracks the performance of the S-Network Emerging Sector Dividend Dogs Index. The index is comprised of the highest paying stocks, or “Dividend Dogs,” from the S-Network Emerging Markets Index, which holds large-cap, emerging market stocks. The Dividend Dogs include the five stocks in each of the ten Global Industry Classification Standard sectors that make up the S-Network Emerging Markets.

The MSCI Emerging Markets Index is on the move higher with China and Russia leading the way as the world looks to recover from the coronavirus pandemic. After falling below 760 back in March during the sell-offs, the index is now back above 1,000.

Emerging markets have always given investors another look at the global growth landscape, particularly since they could be in different economic phases—for example, the U.S. could be reaching a peak while an emerging market country could be in a growth acceleration phase.

EDOG for Income

China, the largest emerging market’s dividend country in dollar terms, remains pivotal to the near-term developing economies outlook.

“China’s domestic fundamentals look increasingly solid,” Goldman strategists, including New York-based Zach Pandl, wrote in a note. “Growth remains sturdy, the virus is reportedly under control, the trade surplus has expanded and both equity markets and interest rates are moving higher.”

EDOG is worth considering today for positioning for an emerging markets rebound in 2021.

“In 2020, the International Monetary Fund (IMF) believes China’s economy will grow by 1% despite COVID-19, while the U.S. will see an 8% decline. In 2021, the IMF expects China’s economy to grow by 8.2%. Emerging markets as a whole are projected to see 5.9% economic growth in 2021,” according to Kiplinger.

Other emerging markets dividend ETFs include the ProShares MSCI Emerging Markets Dividend Growers ETF (CBOE: EMDV), 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.