This New ETF Could Be The Right Way To Play Emerging Markets
In what is shaping up to be another trying year for emerging markets equities and the relevant exchange-traded funds, investors opting to remain long developing world stocks should prize factors such as consistent dividend growth and quality.
Due to a variety of factors, including rising debt loads, declining corporate credit quality and other balance sheet issues, emerging markets dividend growth may be viewed as less dependable than growth of developed markets dividend payers. The ProShares MSCI Emerging Markets Dividend Growers ETF (BATS: EMDV), which debuted Wednesday, can help investors find consistent emerging markets payout growth.
The New ETF In Town
The ProShares MSCI Emerging Markets Dividend Growers ETF joins Maryland-based ProShares' rapidly expanding suite of dividend growers ETFs, which also includes well-known funds such as the ProShares S&P 500 Dividend Aristocrats ETF (NYSE: NOBL) and the ProShares S&P MidCap 400 Dividend Aristocrats ETF (BATS: REGL). EMDV is the third international member of that six-ETF lineup.
The Index, Allocations And Holdings
The new ETF tracks the MSCI Emerging Markets Dividend Masters Index, which “targets companies that are currently members of MSCI Emerging Markets and have increased dividend payments each year for at least seven consecutive years,” according to a ProShares statement.
“The index contains a minimum of 40 stocks, which are equally weighted. No single sector may compose more than 30 percent of the index, and no single country may compose more than 50 percent of the index. If there are fewer than 40 stocks with at least seven consecutive years of dividend growth, or if sector or country caps are breached, the index will include companies with shorter dividend growth histories. The index is rebalanced each February, May, August and November, with an annual reconstitution during the November rebalance,” according to the statement.
Use Of Dividend Increase Streaks
EMDV's use of dividend increase streaks is not unfamiliar to investors in some U.S. dividend ETFs— several of which, including NOBL, use payout increase streaks as a way of identifying dependable dividend growth names.
Due to the fact that is the largest emerging markets dividend payer in dollar terms, it is not surprising that China is EMDV's largest country weight at 22.6 percent of the new ETF's weight. Historically low-yielding India is EMDV's second-largest country weight at 18.8 percent, which can be seen as a sign that Asia's third-largest economy is expected to deliver notable dividend growth in the coming years. South Africa is the only country to garner a double-digit weight EMDV at 14.1 percent of the fund's weight.
EMDV also represents a coup for BATS Global Markets, already the number one U.S. market for the trading of ETFs. With the debut of EMDV, there are now 12 ProShares ETFs listed on The BATS ETF Marketplace.
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