Making its debut on 02/23/2011, smart beta exchange traded fund SPDR S&P Emerging Markets Dividend ETF (EDIV) provides investors broad exposure to the Broad Emerging Market ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. EDIV has been able to amass assets over $384.71 M, making it one of the larger ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P Emerging Markets Dividend Opportunities Index.
This Index generally includes 100 tradable, exchange-listed common stocks from emerging market countries that offer high dividend yields. Additionally, stocks must have positive 3-year earnings growth and profitability. Stocks are weighted by annual dividend yield. To ensure diverse exposure, no single country or sector has more than a 25% weight and no single stock has more than a 3% weight.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for EDIV are 0.49%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 3.56%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Taking into account individual holdings, Ptt Global Chemical Plc Nvdr (PTTGC.R-TH) accounts for about 2.64% of the fund's total assets, followed by China Mobile Limited (941-HK) and Vodacom Group Limited (VOD-ZA).
Its top 10 holdings account for approximately 23.12% of EDIV's total assets under management.
Performance and Risk
The ETF has lost about -7.45% so far this year and is up about 0.10% in the last one year (as of 10/05/2018). In the past 52-week period, it has traded between $29.48 and $36.54.
The fund has a beta of 0.92 and standard deviation of 18.46% for the trailing three-year period, which makes EDIV a medium risk choice in this particular space. With about 137 holdings, it effectively diversifies company-specific risk.
SPDR S&P Emerging Markets Dividend ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could 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 An Inclusion Index. IShares Core MSCI Emerging Markets ETF has $46.93 B in assets, Vanguard FTSE Emerging Markets ETF has $55.87 B. IEMG has an expense ratio of 0.14% and VWO charges 0.14%.
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.
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SPDR-SP EM DVD (EDIV): ETF Research Reports
VANGD-FTSE EM (VWO): ETF Research Reports
ISHARS-CR MS EM (IEMG): ETF Research Reports
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