Vietnam ETF: Future Dividend Potential?

Emerging markets dividends offer investors added compensation for the elevated risk and volatility that come with investing in the developing world. However, emerging markets dividends are a different beast than their developed world counterparts and the concept of developing world payouts is still relatively new. Frontier markets dividends are another ballgame, too, but these payouts can be found and one country has the potential to be a future driver of dividend growth. Emphasis on "potential." Some frontier markets do offer dividend opportunities, Qatar and the United Arab Emirates come to mind, but that pair

to become emerging markets. The iShares MSCI Frontier 100 ETF

has a 30-day yield of just 1.82 percent,

. When Qatar and UAE, a combined 32 percent of the ETF's weight, are stripped out of the top-10 country allocations, FM is not left with a lot of countries that can be considered "dividend destinations." One frontier market beyond Qatar and UAE and that offers some dividend potential is Vietnam. That idea may strike some as odd given that the Market Vectors Vietnam ETF

has a

. Here is the skinny on Vietnam's dividend potential: The country's state-run enterprises are flush with cash, but those companies are not sharing the wealth with the government in the form of dividends. In other words, Vietnam has yet to follow China, Russia and others in forcing or attempting to force its state-controlled firms to lob off dividnds. State-owned enterprises, SOEs, are holding billions of dollars in their coffers, money that could have been submitted to the state budget for spending on infrastructure projects that urgently need funding,

. The Thanh Nien News article points out that a unit of PetroVietnam had profits of $477 million last year, a number that does not sound like much, but remember that the total market value of all Vietnamese stocks is below that of many U.S. companies. Vietnam Rubber had profits of $401.5, and like the PetroVietnam unit, plowed some of that cash back into the business and kept the rest on hand. Vietnam actually approve a law to receive dividends from state-run firms a decade ago, but the plan has never been implemented. Now might be the time as the country has formed a TARP-esque program aimed

. Not all Vietnamese banks need the assistance. Vietinbank is capitalized to the tune of $1.23 billion, according to Thanh Nien news.

Betting on VNM suddenly becoming a dividend diva among international ETFs is a tough call to make. However, it is clear Hanoi has been quite kind to its state-controlled firms. Proceeds from share sales in these companies go back into the business and the companies' budgets are in part funded by taxes paid by private firms. As of last year, Vietnam's government had almost $35 billion invested in state-owned companies

. Why the government has yet to press for increased dividends might appear confusing to Western investors. On the other hand, enthusiasm for VNM's potential as a true frontier dividend ETF is tempered when considering the case of Russia. Russia had big plans for increased dividends from state-controlled companies heading into 2013

, including Sberbank and VTB Bank OJSC along with major energy producers have rebuffed Prime Minister Vladimir Putin's calls for dividends to reach 25 percent of net income. In the case of Vietnam, the country should be forcing its companies to pay more and better dividends. That plan fits with the country's efforts to open its markets and attract more foreign capital. Some foreign investors may not realize this, but dividends paid in Vietnam are not subject to tax,

. Higher dividends and favorable tax treatment of those payouts could spur more foreign direct investment into Vietnam and more assets into VNM. For more on ETFs, click

.