Moreover, DGS’s portfolio shows a dividend yield of more than 4.3%, or more than twice the dividend yield of commonly followed U.S. market cap-weighted indices, which helps investors further generate greater overall returns.
Looking ahead, Gannatti said investors should closely watch a number of catalysts that could further support the emerging market story. For example, the Fed has signaled it could raise rates at least two more times this year, but the U.S. dollar has remained depressed, a positive indicator for the developing markets.
While crude oil and commodity prices have faltered, small-cap emerging markets may avoid the negative impact as large state-run firms are more exposed to commodity prices.
Additionally, investors may want to focus on small-caps since they are more directly tied to a growing emerging consumer base, with most of these companies generating revenue from their domestic markets.
“With the bulk of global population in emerging markets, many investors whom we speak with—even those nervous about emerging markets—recognize that the emerging market consumer will be an important force propelling global growth in the coming decades,” Gannatti added.
DGS tries to reflect the performance of the WisdomTree Emerging Markets SmallCap Dividend Index, which is a fundamentally weighted index that measures the performance of small-cap stocks and are weighted based on annual cash dividends paid.
Top sector weights include consumer discretionary 16.4%, information technology 15.7% and industrials 14.6%. Top country weights include Taiwan 24.9%, China 15.1% and Thailand 11.0%.
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