In this era of artificially low interest rates and the
resulting low yields on U.S. Treasuries, dividends have taken on
elevated importance. The exchange-traded products industry has
met investor demand for dividend products with aplomb,
introducing new income-generating funds at a rapid-fire pace over
the past several years.
Investors looking for some emerging markets exposure to go
along with their dividends are in long. Not only can
investors grab high yields and hedge currency
risk with a number of emerging markets bond ETFs
, there are plenty of noteworthy and anonymous equity-based
emerging markets dividend funds that merit consideration.
One piece of advice: Read the fine print because not all
emerging markets dividend ETFs are created equal.
WisdomTree Emerging Markets Equity Income Fund (NYSE:
The WisdomTree Emerging Markets Equity Income Fund, which will
turn five-years-old next month, is most often compared to the
Vanguard MSCI Emerging Markets ETF (NYSE:
) and the iShares MSCI Emerging Markets Index Fund (NYSE:
), the two largest emerging markets ETFs. DEM isn't as large as
those two funds, but it
did top $3 billion in assets under management
earlier this year
Measuring DEM against VWO is proof positive that dividends
matter. In the past five years, DEM is down less than 1% while
VWO is off more than 22%. Taiwan, Brazil and South Africa combine
for over 52% of DEM's country weight and the fund gives
double-digit allocations to four sectors - financials,
telecommunications, technology and utilities. DEM charges 0.63%
WisdomTree Emerging Markets SmallCap Dividend Fund (NYSE:
The WisdomTree Emerging Markets SmallCap Dividend Fund is the
proverbial king of small-cap emerging markets dividend ETFs with
a first-to-market advantage that could prove daunting for rivals.
Home to almost $883 million in AUM, DGS holds 542 stocks, none
receiving a weight of more than 1.07%, and charges 0.63%.
More importantly, the fund shares something in common with
many of its large-cap focused brethren: A heavy weight to Taiwan.
That country, whose emerging markets status is dubious at best,
accounts for almost 26% of DGS' weight. Another 8.3% goes to
South Korea, another country that many experts and traders are
reluctant to call an emerging market. Israel checks in at 6% and
that country lost its emerging markets status several years
DGS is another prime example of dividends making a difference.
The fund is a direct rival to the SPDR S&P Emerging Markets
Small Cap ETF (NYSE:
), but in the past year, has offered more than 600 basis points
in superior returns. Over the past five years, DGS has
outperformed EWX by about 900 basis points.
EGShares Low Volatility Emerging Markets Dividend ETF
toiled in obscurity since coming to market in
. That means a lot of investors are missing out on an ETF that
has a lot to like.
Not only does HILO feature an almost 17% allocation to
Thailand, one of the top-performing emerging markets in recent
years, the ETF's index sports a yield of 6.44%. Beyond that, HILO
lives up to its low volatility billing as telecommunications and
utilities names combine for almost 45% of the fund's sector
HILO charges 0.85%. Other top country weights include China at
16.7%, Brazil at 16.1% and South Africa at 14.7%.
SPDR S&P Emerging Markets Dividend ETF (NYSE:
Since coming to market in February 2011, EDIV has outperformed
VWO by about 450 basis points. Today, EDIV is found sporting a
yield of almost 5%. Home to 122 stocks and almost $287 million in
AUM, EDIV charges 0.59% annually. With a price/earnings ratio of
8.1, EDIV trades at 1.22, according to data on the SPDRs Web
site. That means EDIV is cheaper on a valuation than EEM and the
broader emerging markets universe.
Financials and technology issues combine for about 48% of
EDIV's weight. At the country level, Taiwan, China and Brazil
combine for 48% as well. One interesting note: In the absence of
a country-specific fund, EDIV offers one of the largest
allocations of any ETF to the Czech Republic at 8.45%.
iShares Emerging Markets Dividend Index Fund (NYSE:
The iShares Emerging Markets Dividend Index Fund is the iShares
answer to EDIV. DVYE debuted in February, exactly one year to the
day after EDIV. The iShares offering is cheaper at 0.49% and a
tad more diverse at the sector level as six industry groups -
industrials, telecommunications, consumer goods, financial,
materials and utilities - receive double-digit allocations.
Taiwan, Brazil and South Africa represent 48% of DVYE's
weight. While the iShares offering may be cheaper in terms of
fees, its valuation metrics are pricy compared to EDIV. DVYE
trades 14.3 times earnings and 3.4 times book value, according to
iShares data. The fund has a 30-day SEC yield of 6.08%.
For more on emerging markets dividend ETFs, please click
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.