Emerging markets equities are turning higher, and many market participants are bullish on the prospects for the asset class heading into 2021. However, some investors still want to take some of the edge off in developing economies. The VictoryShares Emerging Markets High Dividend Volatility Weighted ETF (NasdaqGM: CEY) does just that.
CEY seeks to provide investment results that track the performance of the Nasdaq Victory Emerging Market 500 Volatility Weighted Index, and combines fundamental criteria with individual security risk control achieved through volatility weighting of individual securities.
The rules-based index begins with stocks taken from the CEMP Emerging Market 500 Volatility Weighted Index, a volatility weighted index comprised of the 500 largest emerging market companies by market capitalization with positive earnings in each of the four most recent quarters, and picks out the 100 highest dividend yielding stocks in the CEMP Emerging Market 500 Volatility Weighted Index, which are then weighted based on their daily standard deviation or volatility of daily price changes over the last 180 trading days. Stocks with lower volatility receive a higher weighting and stocks with higher volatility receive a lower weighting, according to a prospectus sheet.
CEY provides investors access to the highest dividend-yielding EM opportunities that have also displayed at least four consecutive quarters of positive earnings.
CEY, which yields a stout 4.80%, is higher by 10.67% over the past month, reflecting investors’ recently renewed enthusiasm for emerging markets equities.
Say Hello to the CEY ETF
Yield can come in many forms. That’s exactly what fixed-income investors need nowadays, especially when it comes to areas outside of bonds. As such, there are a few exchange-traded fund (ETF) options investors can use as long-term income options.
With CEY, investors are offered a balanced approach to EM investing with income-generating equities as opposed to the traditional cap-weighted methodologies that typically incorporate only the largest companies or highest-yielding sectors.
Covid-19 put the hammer down on emerging markets (EM) just as the group was getting 2020 started on the right foot. However, now could be an opportune time for getting EM exposure as economies try to recover from the pandemic. While the EM space has seen better days, the group has the historical ability to outperform.
Another benefit of CEY is that emerging markets central banks are aggressively easing off, and the fruits of their labor could be harvested early next year.
Ongoing positive sentiment in the emerging market as an asset class has attracted greater attention among investors. Moreover, given the extended low-rate environment, many income seekers are turning to alternative sources of yield, such as the rebounding emerging markets.
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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.