Had enough of the hard landing, soft landing, “no” landing talk? With just a few more data points coming in for the Fed before the bank acts, investors would be justified in feeling uncertain about where to go in the markets. One area that invites further attention may not even be in the U.S. market itself, with emerging markets (EM) starting the year with a positive rally; specifically, it may be time for EM dividends, given near-record yields in the WisdomTree Emerging Markets High Dividend Fund (DEM).
Emerging markets have benefitted already this year from having largely taken their rate hike medicine when inflation first reared its ugly head for them earlier in the pandemic. Add in an attractive valuation picture compared to a superheated U.S. market with historically underrated economic size compared to their financial markets, and EM equities grow in appeal.
In this case, EM dividends in particular can not only offer exposure to those emerging markets, but also the added benefit of current income — and in DEM, that income is hitting yields not seen since the 2008 financial crisis. DEM is showing a 10.6% backward-looking yield, according to WisdomTree’s Digital Portfolio Tool, with its main threat being the unlikely prospect of the dollar strengthening even further.
DEM tracks the WisdomTree Emerging Markets Equity Income Index and charges 63 basis points for its use of a fundamental weighting system and its value tilt. DEM has added $133 million in just the last month, according to VettaFi, with $23 million in the last five days. DEM has outperformed its ETF Database category average and its FactSet segment average on a YTD basis as well, returning 5.2% in that time.
DEM hit its five-year mark last summer, with the ETF recently surpassing $2 billion in AUM. There are some other interesting areas in foreign equities and dividends to watch in addition to EM dividends, but with the wide breadth of dividend-paying firms available around the world in DFE, it remains a notable fund to watch.
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