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Another Emerging Markets Income Idea

Another Emerging Markets Income Idea

Emerging markets stocks, particularly with this asset class on the mend in 2016, remain fertile ground for dividend investors. The WisdomTree Emerging Markets Dividend Fund (BATS: DVEM) is one of the newest options for accessing developing world dividend players.

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, the Czech Republic, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey. DVEM's holdings are weighted on the basis of annual cash dividends paid.

Uniquely DVEM

As is the case with many of WisdomTree's domestic and developed markets dividend ETFs, which are some of the best-performing funds in their respective categories, DVEM's holdings are weighted by cash dividends paid. While DVEM itself is new, having debuted in April, its underlying index has been around nine and a half years. Over that period, DVEM's index has offered better than double the returns of the MSCI Emerging Markets Index, according to WisdomTree data

WisdomTree's emerging markets dividend benchmarks “have beaten their cap-weighted counterparts going back nine years to the Index live inception dates as well as in our general research prior to their launch. This is evidence that these three-year trends are counter to the observed longer-run merits of their approach,” said the issuer in a recent note.

Allocations And Weight

DVEM currently allocates about a third of its weight to Taiwan and China, while Russia and South Korea combine for nearly 19 percent of the ETF's geographic lineup. The ETF is outperforming at a trying time for emerging markets dividends. Payouts from developing world companies fell 17 percent in the first quarter, though gains in India helped offset some of the reduced payouts from Brazilian commodities producers, according to Henderson Global Investors.

Brazil and India combine for about 10.4 percent of DVEM's weight. 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.

“For those who believe in mean reversion of asset classes—and factor investors might want to increasingly consider mean reversion of factor investing strategies—EM dividends as a value investing strategy seem to make a lot of sense,” added WisdomTree.

Posted-In: Long Ideas Dividends Emerging Markets Specialty ETFs Emerging Market ETFs Top Stories Markets Trading Ideas Best of Benzinga


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