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Is SPDR S&P Emerging Markets Dividend ETF (EDIV) a Strong ETF Right Now?

Sweta Killa
Kennametal (KMT) gains from initiatives and exposure in various end markets. However, weakness in organic sales, high costs and forex woes are concerning.

The SPDR S&P Emerging Markets Dividend ETF (EDIV) made its debut on 02/23/2011, and is a smart beta exchange traded fund that provides broad exposure to the Broad Emerging Market ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

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.

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.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

EDIV is managed by State Street Global Advisors, and this fund has amassed over $437.93 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

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.

Operating expenses on an annual basis are 0.49% for this ETF, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 3.33%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Public Joint-Stock Company Gazprom Sponsored Adr (OGZPY) accounts for about 3.07% of the fund's total assets, followed by Ptt Public Co. Ltd. Nvdr (PTT.R-TH) and Ptt Global Chemical Plc Nvdr (PTTGC.R-TH).

The top 10 holdings account for about 25.43% of total assets under management.

Performance and Risk

The ETF has gained about 3.74% so far this year and is down about -5.07% in the last one year (as of 05/23/2019). In the past 52-week period, it has traded between $27.94 and $33.70.

The ETF has a beta of 0.81 and standard deviation of 17.32% for the trailing three-year period, making it a medium risk choice in the space. With about 137 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR S&P 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 An Inclusion Index. IShares Core MSCI Emerging Markets ETF has $56.11 B in assets, Vanguard FTSE Emerging Markets ETF has $60.78 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.

Bottom Line

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 S&P Emerging Markets Dividend ETF (EDIV): ETF Research Reports
 
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
 
iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
 
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