WisdomTree Adds To EM Dividend Suite With New ETF

WisdomTree Investments Inc. WETF, the fifth-largest U.S. issuer of exchange traded funds, added to its already formidable lineup of emerging markets dividend ETFs Thursday with the debut of the WisdomTree Emerging Markets Dividend Fund DVEM.

The WisdomTree Emerging Markets Dividend Fund follows the WisdomTree Emerging Markets Dividend Index (WTEMI), a fundamentally-weighted benchmark featuring dividend payers from Brazil, Chile, China, Czech Republic, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, Turkey. DVEM's holdings are weighted on the basis of annual cash dividends paid.

There are advantages to weighing stocks in an ETF by their dividends paid, or their dividend stream as WisdomTree puts it.

“This methodology of weighting stocks by their Dividend Stream can help magnify the effects dividends have on performance, potentially increasing returns or reducing volatility compared to traditional capitalization-weighted indexes. The power of weighting equity markets by the dividends companies pay rather than by their market value can be seen in the live performance track record of the WisdomTree Emerging Markets Dividend Index vs. the MSCI Emerging Markets Index,” said the issuer in a statement.

DVEM's underlying index has a dividend yield of 4.3 percent, well in excess of the yield on the MSCI Emerging Markets Index. China and Hong Kong combine for over 27 percent of the new ETF's geographic lineup. Russia and Brazil, two of the most volatile emerging markets, and South Korea, one of the least volatile developing economies, each command weights in excess of 9 percent.

Since inception in mid-2007, DVEM's underlying index has handily outperformed the MSCI Emerging Markets Index while displaying a noticeable correlation to the widely followed emerging markets benchmark, according to WisdomTree data.

Like many emerging markets dividend ETFs, DVEM's largest sector weights include financial services, telecom and energy. In that order, those three sectors combine for over 52 percent of DVEM's weight. Consumer staples is the only sector to get a double-digit allocation in the new ETF. Roughly half of DVEM's top 10 holdings are state-controlled companies.

When DVEM's index was last rebalanced, 45 percent of its weight was tilted toward companies with dividend yields of 4.6 percent or higher. That is more than double the weight of the MSCI Emerging Markets Index to the comparable stocks.

DVEM's annual fee is 0.32 percent, or $32 per $10,000 invested.