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.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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, and has been able to amass over $390.25 M, which makes it one of the larger ETFs in the Broad Emerging Market ETFs. EDIV, 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.49% for EDIV, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 3.52%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, China Mobile Limited (941-HK) accounts for about 2.68% of the fund's total assets, followed by Ptt Global Chemical Plc Nvdr (PTTGC.R-TH) and Vodacom Group Limited (VOD-ZA).
The top 10 holdings account for about 23.04% of total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Emerging Markets Dividend ETF has lost about -6.51% so far, and it's up approximately 1.58% over the last 12 months (as of 11/20/2018). EDIV has traded between $27.94 and $36.54 in this past 52-week period.
EDIV has a beta of 0.90 and standard deviation of 18.79% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 135 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 $47.59 B in assets, Vanguard FTSE Emerging Markets ETF has $55.45 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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