Another New ETF For EM Dividend Investors
Call it a trend. Call it dividend mania or dividend-sanity. Whatever vernacular is applied, the numbers say more and more dividend ETFs are coming to market. There were nearly 170 dividend ETFs on the market at the end of June.
That number is now higher and some of the growth is attributable to new funds offering investors exposure to emerging markets dividends. Add the EGShares EM Dividend High Income ETF (NYSE: EMHD) to the list. The EGShares EM Dividend High Income ETF is the third emerging markets dividend product from EGShares and the second to come to market since early July.
Related: A New ETF For EM Dividend Growth.
Like the EGShares Emerging Markets Dividend Growth (NYSE: EMDG), the firm's dividend fund that debuted last month, EMHD tracks a FTSE index that excludes Taiwan. EMHD tracks the FTSE Equal Weighted Emerging All Cap ex Taiwan Diversified Dividend Yield 50 Index, but what will likely be more enticing to investors than the index's name is its whopping 8.8 percent yield as of July 31.
An index yield of 8.8 percent implies EMHD could sport a dividend yield well in excess of some of the most popular emerging markets dividend ETFs. The new ETF's index is designed "to provide a higher dividend payout relative to other widely used EM dividend indices. The equally-weighted index measures the stock performance of the 50 highest-yielding, liquid EM equity securities in the FTSE Emerging All Cap ex Taiwan Universe, excluding the least capitalized dividend-paying companies," said EGShares in a statement.
EMDG also excludes Taiwan. With rising competition in the emerging markets dividend growth space, these funds need to be able to prove legitimate growth in payouts. EMHD's average constituent payout over the trailing 12 months is 80 cents per share, up from 47 cents per share over the trailing five years, according to EGShares data.
Additionally, only companies that have paid dividends for at least the past three years are included in the index. Companies with payout ratios over 100 percent are excluded as are those with trailing one-year dividend yields of 20 percent or more. EMHD's index starts with a universe of at least 1,300 companies, but is whittled down to 50 with a cap of 10 stocks per country and sector.
Brazil, which is arguably a mixed dividend destination at the moment, is the new ETF's largest country weight at 20.7 percent. South Africa chimes in at just over 18 percent while China, the largest emerging markets dividend payer in dollar terms, gets a weight of 14.7 percent. Turkey is next at just under 14 percent. Pakistan, considered a frontier market by some index providers, rounds out EMHD's top-five country weights at about 9.9 percent.
The top-five sector allocations are 20.8 percent to financials, 20.3 percent to utilities 16.4 percent to materials, 12.3 percent to telecom and 10.1 percent to consumer goods. Colombia's state-run oil giant Ecopetrol (NYSE: EC) is among the U.S.-listed names in EMHD's lineup. EMHD has an annual expense ratio of 0.85 percent.
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Disclosure: Author owns known of the securities mentioned here.
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