It may seem like an audacious proposition in this volatile market environment where U.S. and global stocks - both developed and emerging markets - are being beaten up on daily basis, but emerging markets will rise again. And we know this much: Dividend investing never goes out of style so why not consider combing the best of worlds? Meaning the high-growth prospects of emerging markets and the allure of income.

The WisdomTree Emerging Markets Equity Income Fund (NYSE: DEM), which earlier this year topped $3 billion in assets under management, does just that. First things first, the WisdomTree Emerging Markets Equity Income Fund, like so many other compelling emerging markets ETFs, does not need to be bought right this moment.



As a group, emerging markets ETFs are being held hostage by China's weakening economy Europe's sovereign debt contagion. DEM's chart is downright and the yield of almost 4.4% looks destined to rise in the near-term. That's the cautionary tale.



Home to almost 280 stocks, DEM devotes almost 43% of its weight to Taiwan and Brazil. South Africa, Malaysia and Chile round out DEM's top-five country weights. At the sector level, financials account for over a quarter of the ETF's explaining much of the recent downturn as investor have shunned banks regardless of where those banks are based. Telecom, technology and utilities represent another 45% of DEM's weight.



There is a silver lining with DEM that patient investors will want to hear and it extends beyond the dividend, which in dollar terms is $2.31 per share on an annual basis and that's solid among dividend ETFs. The silver lining is performance. Since DEM is multi-country emerging markets ETF (the fund offers exposure to 18 different markets), it's apt to be compared to the Vanguard MSCI Emerging Markets ETF (NYSE: VWO) and the iShares MSCI Emerging Markets Index Fund (NYSE: EEM), the two largest emerging markets ETFs by assets.



Actually, there's not much competition. Year-to-date, DEM is the clear-cut winner. Over the past five years, DEM is the only member of the trio to show positive returns. That statistic becomes all the more noteworthy when considering DEM is also the only member of the trio to offer a noteworthy dividend and yield.



While DEM's expense ratio of 0.63% makes it pricier than VWO, the yield and performance advantages outweigh the cost benefit of passing over DEM in favor of the Vanguard fund. Assuming dividends are reinvested, something the aforementioned performance statistics do NOT include, the performance gap widens in DEM's favor with each passing year underscoring the notion that patient investors will be rewarded by DEM. In the essence of patience, wait for DEM to test support at $50 and see if that holds before jumping in.

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Tickers in this Article: DEM, VWO, EEM

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