Digging Into EDOG's June Performance | ETF Trends

The ALPS Emerging Sector Dividend Dogs ETF (EDOG), which was among ALPS’ most popular ETFs last month as measured by net inflows, returned -10.25% in June.

Emerging markets were negatively affected in June by increasing global inflation and rising fears of a global recession. Global growth expectations continued to take a hit with supply chain disruptions, the war in Ukraine, and the risk of stagflation.

While all sectors in EDOG provided negative performance for the month, there are still strategic reasons why investors are allocating assets to this fund. A new narrative has been emerging in recent weeks as investors wonder whether it’s time to start buying up stocks again, citing cheap historical valuations.

EDOG’s month-end P/E ratio of 7.81x remains at a sizable discount to that of the Morningstar Emerging Markets Index P/E of 10.31x, ALPS wrote in a recent insight. The outlook for income seekers is also strong. EDOG’s underlying index, EDOGX, carries a dividend yield of 7.64%, which far exceeds a comparable benchmark yield for the Morningstar Emerging Markets Index (MEMMN) of 3.41%, according to ALPS.

EDOG’s underlying index carries a higher trailing 12-month dividend yield relative to major emerging market indices due to its relative overweight to higher-yielding names in Malaysia, South Africa, and Chile.

The Chinese names in EDOG were a bright spot in June despite a tough month for emerging markets, propelled higher by a potential relaxation of the Zero COVID policy and monetary easing in the country, ALPS wrote. 

Looking at EDOG’s Chinese holdings, Huadian Power Intl Corp-H (1071 HK, 2.20% weight as of June 30) returned 1.76% after the government began to relax its Zero COVID policy, along with an improved outlook for the power producer due to falling commodity prices leading to better margins.

Within EDOG, Brazil had the greatest outperformance (+7.14%) when compared to the Morningstar emerging markets benchmark (MEMMN), according to ALPS. Brazilian electricity company Centrais Eletricas BR-SP (EBR US, 2.28% weight as of June 30) gained 0.91% after the Brazilian government passed a bill to privatize the company, which remains Latin America’s largest utility power provider, diluting the state’s 61% stake.

Other emerging markets ETFs to consider include the BNY Mellon Emerging Markets Equity ETF (BKEM) and the Invesco BLDRS Emerging Markets 40 ADR Index Fund (ADRE).

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