Emerging Markets Dividends Can Reward Again in 2022 | ETF Trends

Following dark days in 2020, global dividends rebounded by 21% last year, and emerging markets got in on the act.

In fact, dividend-payers provided a superior avenue for emerging markets equity exposure last year. Take the case of the WisdomTree Emerging Markets High Dividend Fund (NYSEArca: DEM). That exchange traded fund gained 11.5% last year while the widely followed MSCI Emerging Markets Index slid 3.6%.

DEM follows the WisdomTree’s Emerging Markets High Dividend Index (WTEMHY), a yield-weighted benchmark. However, the fund is still levered to payout growth in developing economies, and that’s something to consider as global dividends are forecast to rise by 6% this year.

“Though aggregate dividend payouts increased in 2021, the pandemic created starkly uneven paths across countries and sectors. Compared to their pre-pandemic level, dividends increased strongly in Asia Pacific, grew moderately in the Americas and saw a minimal rebound in Europe. Although the technology sector has boomed, travel, leisure and automotive still face an uphill climb,” said Clara Besson, EMEA dividend research lead, IHS Markit.

The research firm notes that while “each region will see dividend payout growth,” the intensity of payout increases will vary at the regional and sector levels. Fortunately, DEM is heavily allocated to some sectors that are expected to be prodigious growers of dividends this year. That includes an almost 26% weight to financial services stocks.

“Banks, the top dividend payer among sectors, will distribute more than 283 billion USD in payouts, with the expectation that banks will prefer buybacks over dividends payouts this year,” adds IHS Markit.

The research firm also forecasts that dividend growth in emerging markets will jump 23% this year, easily outpacing increases in developed markets. That’s a point in DEM’s favor, as is the fact that the WisdomTree ETF was 400 basis points less volatile than the MSCI Emerging Markets Index in 2021.

Another advantage offered by DEM is that the fund allocates over 22% of its weight to the technology and energy sectors, which are slated to be two leading sources of global dividend growth this year.

“The oil and gas sector will continue to recover with payouts expected to reach 274 billion USD in 2022, up from 225 billion USD in 2021,” according to Markit.

Up 4.16% to start 2022, DEM yields 4.48%.

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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.