It’s long been said that emerging markets equities offer investors a value proposition relative to U.S. stocks, and that remains true today despite a rough five-month stretch for the S&P 500.
However, as is the case with searching for value in other regions, some exchange traded funds are better suited for emerging markets value-seekers than others. One ETF in the emerging markets space is the ALPS Emerging Sector Dogs ETF (NYSEArca: EDOG).
“Market volatility seems like it will be a feature for the rest of the year, but recent moves have actually solved a problem for long-term investors: neither equity nor fixed income valuations are demanding. In fact, we haven’t seen an entry point like this for the two key components of balanced portfolios since 2018,” according to J.P. Morgan Asset Management. “Corporate earnings look solid, valuations are reasonable, and fixed income provides invaluable protection if we do end up seeing a recession over the medium term. This makes us constructive on markets for the remainder of the year.”
The ALPS fund is topping the MSCI Emerging Markets Index by about 520 basis points on a year-to-date basis. The ETF has an underweight to China and recently swiftly removed Russian stocks from its holdings. Commodities exposure is also offered by EDOG.
“With commodity prices still relatively high, business and financial conditions are improving for emerging markets (EM) exporters while worsening for importers,” noted Morgan Stanley.
EDOG, which follows the S-Network® Emerging Sector Dividend Dogs Index, is levered to the commodities exporters theme, as Brazil, Chile, South Africa, and Mexico combine for about 38% of the ETF’s weight.
EDOG yields 2.89%. That’s more than double the dividend yields on the MSCI Emerging Markets Index and the S&P 500.
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).
For more news, information, and strategy, visit the ETF Building Blocks Channel.
vettafi.com is owned by VettaFi, which also owns the index provider for EDOG. VettaFi is not the sponsor of EDOG, but VettaFi’s affiliate receives an index licensing fee from the ETF sponsor.
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.