A couple of weeks ago, I blogged about looking beyond the
Vanguard MSCI Emerging Markets ETF (NYSEArca:VWO) and the iShares
MSCI Emerging Markets Index Fund (NYSE Arca:EEM) for emerging
Specifically, I mentioned a few single-country ETFs with
potential for outperformance in the coming decade.
But for investors uncomfortable with jumping into
country-specific ETFs and who prefer broad exposure,
dividend-weighted funds like the WisdomTree Emerging Markets Equity
Income Fund (NYSEArca:DEM), can offer a great alternative way to
play emerging markets.
DEM differs from cap-weighted funds like VWO and EEM by not only
weighting its constituents by annual dividends paid, but also by
selecting its holdings based on dividend yields.
And true to its word, DEM sports an impressive dividend
It might come as a surprise to you that DEM actually has a
trailing 12-month yield of 4.45 percent and a 30-day SEC yield of
3.21 percent. In comparison, VWO and EEM have a trailing 12-month
yield of 2.36 and 2.12 percent, respectively.
DEM's dividend-based methodology also leads to a unique
portfolio with very different country exposures than what investors
get in VWO or EEM via the MSCI Emerging Markets Index.
Country Weightings (in %)
||EEM (MSCI EM Index)
EM Equity Income Index)
But the real kicker here is that it's handily outperformed both
VWO and EEM over one- and three-year periods in total returns-and
in also in price returns.
The SPDR S&P Emerging Markets Dividend ETF (NYSEArca:EDIV)
is also worth mentioning here. The dividend-weighted fund launched
in February 2011, and while it doesn't have a long track record
yet, it also beat out VWO and EEM over the past one-year
For emerging markets dividend plays, the iShares Emerging
Markets Dividend Index Fund (NYSEArca:DVYE) is also available. The
fund was only launched this past February, but it's one to
But beyond simply broad-based funds, yield-hungry investors
might also be interested in the WisdomTree Emerging Markets
SmallCap Dividend Fund (NYSEArca:DGS), which was the first
small-cap-focused emerging markets ETF to launch.
DGS also sports a handsome dividend yield, a trailing 12-month
yield of 3.84 percent and a 30-day SEC yield of 7.63 percent.
Plus, DGS' small-cap tilt gives the fund significant exposure to
industrials and the consumer side of emerging markets, as opposed
to large, state-owned financial and energy companies that play a
heavy hand in broad, cap-weighted funds like VWO and EEM.
Sector Weightings (in %)
||EEM (MSCI EM Index)
||DGS (WisdomTree Emerging
Markets SmallCap Dividend Index)
|Consumers (Staples and Cyclicals)
And once again, it's outperformed both VWO and EEM over the past
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