After grinding sideways all week, major U.S. equity indexes finally made way for the bears on Thursday as disappointing corporate results gave investors reasons to lock in profits ahead of today’s data release frenzy; Cisco’s layoff announcement and cautious outlook coupled with Wal-Mart’s earnings miss blanketed Wall Street with a sense of uncertainty [see also The Complete Visual History Of GLD].
Amid the profit taking wave at home, EG Shares rolled out a dividend-focused ETF geared towards income hungry investors looking to diversify into developing economies: the EM Dividend High Income ETF (EMHD).EMHD: Target Growing Dividends Overseas
The new EG Shares ETF, which began trading on August 15th, is linked to the FTSE Emerging All Cap ex Taiwan Diversified Capped Dividend Growth 50 Index; a benchmark designed to measure the performance of 50 emerging markets stocks whose five-year dividend payout growth is faster than the average dividend payout growth in the FTSE All Cap Emerging ex-Taiwan Universe. This product launch showcases the growing popularity of investors seeking out attractive sources of current-income, while at the same time positioning themselves for a rebound in emerging markets [see 101 High Yielding ETFs For Every Dividend Investor].
EMHD’s underlying index boasted a hefty 8.8% yield at the time of launch and is constructed in a way to consider both dividend coverage as well as consistency. The benchmark ensures diversification in two ways: first and foremost, the entire basket of securities is equal-weighted, allowing for the fund to offer a higher yield than comparable market-cap weighted ETFs; second, the number of stocks per industry and country is limited to 10, making for a far more balanced portfolio compared to other emerging markets equities funds, which are tilted towards big banks and oil companies from Brazil and China [see Which Is The Best Emerging Market ETF For You?].
The new EG Shares ETF is designed to pay out dividends on a monthly basis and its top two sector and country allocations at the time of launch were Financials and Utilities from Brazil and South Africa.Meet The Competition
EMHD offers a compelling objective and with a price tag of 0.85% it falls towards the more expensive end of the cost spectrum for the Emerging Markets Equities ETFdb Category, which features an average expense ratio of 0.65%. The new ETF will face some stiff competition from more established funds also targeting the emerging markets dividend space, including:
- WisdomTree Emerging Markets High-Yielding Equity Fund (DEM, A-) with nearly $5 billion in total assets under management
- WisdomTree Emerging Market SmallCap Dividend Fund (DGS, A) with over $1.6 billion in AUM
- State Street SPDR S&P Emerging Markets Dividend ETF (EDIV, A-) with over $500 million AUM
EMHD warrants a closer look from anyone looking to geographically diversify their portfolio’s equity component while simultaneously tapping into a meaningful current-income stream.
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Disclosure: No positions at time of writing.