The rise in popularity of exchange-traded funds has made it easier than ever to invest a specific group of equities, a country’s currency or even an investing strategy. Income investors are a particular group that has turned to ETFs to help increase their exposure to dividends, especially when it comes to investing in emerging markets.
Historically, it would have been nearly impossible for a retail investor to buy or sell foreign stocks unless they had special permissions in place with their broker. Since investments in emerging markets tend to be riskier, it's only natural that investors have used ETFs to increase their exposure to a basket of dividend-paying stocks from various emerging markets. Income-paying stocks tend to have an inherent safety factor built in since they have medium-to-large market capitalizations. In the article below we’ll take a look at a few of the most popular emerging market dividend ETFs. (For more, see: An Evaluation of Emerging Markets).
SPDR S&P Emerging Markets Dividend ETF (EDIV)
Exposure: Taiwan, China, South Africa, Brazil, Thailand
The SPDR S&P Emerging Markets Dividend ETF (EDIV) is one of the most popular ETFs on the market for traders looking to gain exposure to high yielding emerging market common stocks. For those unfamiliar with the fund, it has total net assets of $442.3 million and holds 121 positions. The fund’s 30-day SEC yield is 5.17% and is a good candidate for investors looking to increase exposure to one of the five countries shown in the table below. About 18.5% of the fund is allocated to basic materials, 18% to telecommunications, 16% to financial services and 12% to technology.
iShares Emerging Markets Dividend ETF (DVYE)
Exposure: Taiwan, Brazil, South Africa, China, Poland
The iShares Emerging Markets Dividend Index Fund (DVYE) is another popular choice for investors looking to invest in a broad basket of high-paying dividend stocks across several lucrative emerging markets. The fund has total net assets of $210.6 million holds 103 positions. The fund’s 30-day SEC yield is 5.61%. In the table below you can see that its country allocations are similar to EDIV's, but the weightings are different. About 16% of the fund is allocated to consumer cyclicals, 15% each to basic materials and telecommunications, 12% to technology and 11% to financial services. (For more, see: Emerging Market ETFs for your Retirement Accounts).
WisdomTree Emerging Markets Equity Income Fund (DEM)
Exposure: China, Russia, Taiwan, South Africa, Brazil
The WisdomTree Emerging Markets Equity Income Fund (DEM) is another popular choice for investors seeking to gain exposure to high-paying dividend stocks from key emerging markets around the world. The fund has the largest amount of total net assets in the group and consists of 399 different positions. Its SEC 30-day yield stands at 5.27% and country exposure looks a bit different than the two previous funds. DEM has the greatest exposure to China and it also counts Russia as a country of top interest, which the others above do not. About 28% of the fund is allocated to financials, 18% to energy, 15.5% to telecommunications, and 12% to materials. (For more, see; Getting Into International Investing).
The Bottom Line
Investing in emerging markets has been rising in popularity over the past few years — especially amongst income investors. In the article above we took a look at three popular choices for income investors seeking emerging market exposure. Based on the charts you can get a good idea of how different these types of funds can be despite their similar objectives. The best choice will really come down to the investment objectives of the individual investor and it will also depend on what regions one is looking to be exposed to. (For more, see: These International Dividend ETFs are Cheap Cheap Cheap).