When a coronavirus vaccine is finally ready for widespread distribution, developing economies won’t be left out of the fray. That’s good news for exchange traded funds such as the ALPS Emerging Sector Dogs ETF (NYSEArca: EDOG).
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.
Proving it has leverage to positive news on the coronavirus vaccine front, EDOG finished November with a gain of 17% despite a pullback on the final trading day of the month.
“More vaccine cards may be played in emerging markets’ favor, though. These include another budget option from Johnson & Johnson (JNJ), and China’s Sinovac project, which could export most of its product, since the Chinese population doesn’t seem to need it,” reports Craig Mellow for Barron’s.
EDOG Ready for Upside in 2021
Emerging markets equities are turning higher, and many market participants are bullish on the prospects for the asset class heading into 2021.
Covid-19 put the hammer down on emerging markets (EM) just as the group was getting 2020 started on the right foot. While the EM space has seen better days, the group has the historical ability to outperform.
“Emerging markets could also catch a tailwind from a developed-country bounceback, particularly laggards like Brazil, where stocks are down 30% year to date in dollar terms, and South Africa, which is off 12%, and could fetch more for commodity exports,” according to Barron’s. “Mexico, where shares are hovering near five-year lows, will benefit from a healthier U.S., though its own Covid eradication might move slower.”
Ongoing positive sentiment in the emerging market as an asset class has attracted greater attention among investors. Moreover, given the extended low-rate environment, many income seekers are turning to alternative sources of yield.
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.