The pain has been pretty severe in the dividend ETF market
lately, largely thanks to a shift in the Fed's policies. Now,
with the prospect of bond buying ending sooner rather than later,
T-Bills have seen their yields rise, dulling the appeal of
comparable income-paying securities in the equity world.
Still, rates for a number of income securities are
historically low forcing many investors to bite the bullet and
dive into some little-appreciated corners of the yield world. One
such segment that most investors overlook is undoubtedly the
dividend growth market (also see
Have You Overlooked These Dividend ETFs?
Securities in this corner of the income universe are known for
their slow and steady payout increases, and conservative
management principles. Plus, the constant dividend increases do
suggest that these stocks are doing well and can afford to give
back more to shareholders.
Due to this, it could be argued that this segment may be
a winner thanks to safety and good management, two factors which
are key in today's type of market. While it is true that these
growth companies generally don't have as robust of yields as many
of their counterparts, this could actually work to their
advantage in today's climate which has seen truly high yielders
sell off at a moment's notice.
While there are a number of ways to apply this technique in
the developing world, there aren't many good options for the
emerging market dividend growth segment. This is being corrected
by EGShares though, as the company has just launched a new
Emerging Markets Dividend Growth ETF (EMDG)
which we have highlighted in greater detail below.
EMDG in Focus
This ETF looks to follow the price and yield performance of
the FTSE Emerging All Cap ex Taiwan Diversified Capped Dividend
Growth 50 Index. This benchmark looks to give investors exposure
to 50 firms whose 5-year dividend payout growth is faster than
the average dividend payout growth rate in the FTSE All Cap
Emerging ex Taiwan world.
This results in a portfolio that has about 20% of its assets
in financials, with 17% in oil and gas, and then 14.6% in
consumer goods. From a national perspective, China takes the top
spot at 19.5%, followed by South Africa (17%), Brazil (15.8%),
and Indonesia (10.9%), so there is decent
diversification from a country look too (see
3 Important Questions About Your ETF
In terms of individual companies, no single firm takes up more
than 3% of assets, suggesting limited concentration issues.
However, large caps do dominate the portfolio, as the average
market cap comes in at just under $15 billion.
Investors should also note that the ETF is kind of on the
expensive side, with a cost coming in at 85 basis points a year.
This is offset by the robust yield of the underlying index
though, as the current reading on this front comes in just below
3.9%, suggesting that it is a solid choice for income hungry
"Many emerging market-based multinational companies have
demonstrated their ability to increase dividends," said Marten
Hoekstra, CEO of Emerging Global Advisors in a press release. "We
launched EMDG as an investment tool to enable dividend growth
investors to implement their investment strategy in emerging
markets and diversify dividend yield sources."
There aren't any other emerging market dividend growth
on the market, so it looks as though EMDG will dominate the
space, at least for the time being. Still, there are a host of
other emerging market dividend ETFs out there, including several
billion dollar products (see
What Does Your Income ETF Focus On?
Some of the most popular include the
WisdomTree Emerging Markets Equity Income Fund (
SPDR S&P Emerging Markets Dividend ETF (
. These two both have hundreds of millions in assets under
management, and decent volume to boot.
Investors should also note that the dividend growth model is
extremely popular for domestic markets. There are currently two
products that have a stranglehold on this segment, the
SPDR S&P Dividend ETF (
Vanguard Dividend Appreciation ETF (
Both of these have more than $10 billion in assets under
management and volume higher than one million shares a day. If
the new emerging market fund-which follows a similar metric to
VIG and SDY-can see even a fraction of this success, EGShares
could have a winner in its lineup with EMDG, giving investors a
new option in today's uncertain dividend ETF climate.
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WISDMTR-EM EQ I (DEM): ETF Research Reports
SPDR-SP EM DVD (EDIV): ETF Research Reports
SPDR-SP DIV ETF (SDY): ETF Research Reports
VANGD-DIV APPRC (VIG): ETF Research Reports
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