Making its debut on 02/23/2012, smart beta exchange traded fund iShares Emerging Markets Dividend ETF (DVYE) provides investors broad exposure to the Broad Emerging Market ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
DVYE is managed by Blackrock, and this fund has amassed over $646.22 M, which makes it one of the larger ETFs in the Broad Emerging Market ETFs. Before fees and expenses, DVYE seeks to match the performance of the Dow Jones Emerging Markets Select Dividend Index.
The Dow Jones Emerging Markets Select Dividend Index measures the performance of the companies in emerging market countries that have provided relatively high dividend yields on a consistent basis over time.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.49%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 6.16%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Looking at individual holdings, Severstal (CHMF) accounts for about 2.10% of total assets, followed by Nanya Technology Corp and Astral Foods Ltd (ARL).
Its top 10 holdings account for approximately 17.94% of DVYE's total assets under management.
Performance and Risk
Year-to-date, the iShares Emerging Markets Dividend ETF has added roughly 8.32% so far, and was up about 10.49% over the last 12 months (as of 10/29/2019). DVYE has traded between $36.70 and $42.09 in this past 52-week period.
DVYE has a beta of 0.77 and standard deviation of 14.33% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 120 holdings, it effectively diversifies company-specific risk.
IShares Emerging Markets Dividend ETF is not a suitable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $56.72 B in assets, Vanguard FTSE Emerging Markets ETF has $63.48 B. IEMG has an expense ratio of 0.14% and VWO charges 0.12%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
iShares Emerging Markets Dividend ETF (DVYE): ETF Research Reports
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
To read this article on Zacks.com click here.