These days, the less exposure to Russian stocks an emerging markets exchange traded fund has the better.
The ALPS Emerging Sector Dogs ETF (NYSEArca: EDOG) is a prime example of an emerging markets ETF that, although it’s passively managed, reacted swiftly to significantly reduce its Russia exposure amid that country instigating a war with neighboring Ukraine.
EDOG, which turns eight years old later this month, follows the S-Network Emerging Markets Index. All Alerian S-Network indexes removed “all Russian-linked index constituents from all Alerian S-Network Equity Indexes effective from the open on Monday, March 7, 2022,” according to the index provider.
As of March 10, EDOG’s Russia exposure was just 0.43%, making that country by far the smallest of the dividend fund’s 15 geographic allocations. South Africa is the largest at 13.53%, according to ALPS data.
“Following the removal of Russian-linked index constituents from all indexes, Russian-linked index constituents will be ineligible for inclusion in all Alerian S-Network Global Equity indexes until additional timetable for re-inclusion is agreed upon with the Alerian S-Network Index Committee,” adds the index provider.
The removal of Russian stocks from EDOG underscores the gravity of economic sanctions by the West against Russia and the impact those moves are having on the country’s economy. For years, Russia was one of the largest emerging markets dividend payers, owing to its plethora of state-owned banks and energy companies.
The Kremlin often weighed on those companies to maintain, if not grow, dividends, making Russia a logical inclusion in EDOG. Today, EDOG yields 2.96%, nearly double the dividend yield on the MSCI Emerging Markets Index.
Even with the removal of Russian stocks, EDOG maintains a 13.35% weight to energy stocks – its largest sector allocation – confirming the fund is positioned to continue capitalizing on rising oil prices. And even with the Russia calamity, EDOG is beating the MSCI Emerging Markets Index by 100 basis points year-to-date.
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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