With EM stocks resurgent in 2025, it’s reasonable to assume growth fare, such as consumer internet and technology, is leading that charge. Indeed, that’s accurate, but there’s more to the story. EM equities with value leanings are holding up well amid this year’s growth-inspired rally. Just look at the ALPS Emerging Sector Dividend Dogs ETF (EDOG). It’s higher by nearly 12% YTD.
Relative to traditional broad market ETFs tracking stocks in developing economies, EDOG is a yield star. Its trailing 12-month dividend yield of 6.24% is more than double the comparable metric on the MSCI Emerging Markets Index.
Adding to the case for EDOG is its ability to be paired with a basic EM fund without exposing advisors and investors to significant holdings-level overlap. In fact, EDOG’s overlap by weight with the MSCI Emerging Markets Index is just 1%.
EM Dividend Story Is Improving
The EM dividend proposition has long been glossed over relative to Europe and North America payout stocks. But that may be changing for the better. In what could prove to be good news for EDOG investors, Invesco’s Asia and Emerging Markets team noted “dividends and share buybacks are becoming more common” in some developing economies.
Among EMs, the Asia-Pacific region has become a hotbed of improving shareholder rewards. That’s pertinent regarding EDOG. That’s because the top five country weights in the ALPS ETF are Asia nations.
EDOG’s status as a dividend-focused fund could make it appealing to long-term investors looking to diversify U.S.-heavy equity portfolios while potentially mitigating some of the volatility associated with EM stocks.
“Dividends can be attractive to investors in all markets: they inherently signal that companies are healthy and generating enough cash to be paid out to shareholders. For investors that are focused on quality and value, dividends are particularly important when looking at emerging market stocks,” according to J.P. Morgan Asset Management.
Quality Leanings Are Important
EDOG further defrays risk by equally weighting its sector exposures. So it’s not dependent on a small number of sectors to source income. Additionally, the ETF’s quality leanings are important. That’s because, as is the case with developed market stocks, investors want to know their dividend payers have the ability to, at the very least, sustain current payouts and potentially grow those distributions over the long term.
VettaFi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for EDOG for which it receives an index licensing fee. However, EDOG is not issued, sponsored, endorsed, or sold by VettaFi. VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of EDOG.
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