Equity: Emerging Markets - High Dividend Yield
Emerging markets have proved popular with investors seeking higher yields given the low-interest-rate environment in much of the developed world.
DEM dominates the space in terms of
“Among established funds, DEM offers the best take on marketlike exposure” assets and liquidity. The fund has the widest scope too, holding a broad array of over 300 companies. DEM differs from its peers in that it weights its holdings based on total annual dividends paid, not dividend yields. Among established funds, DEM offers the best take on marketlike exposure and earns our nod as the Analyst Pick for the segment.
QDEM is the newest of the bunch and launched in January 2014. It tracks the same index as our benchmark, earning it a near perfect Fit score, though investor interest has yet to materialize.
EDIV launched in February 2011 and has attracted solid assets thus far. EDIV departs significantly from marketlike coverage, tilting away from Russia and China in favor of smaller emerging market countries in Europe and Asia, as well as Brazil. DVYE offers similar coverage.
HILO comes with a twist, providing concentrated exposure to just 30 high-yielding, low-volatility emerging market companies. The fund will change indexes in January 2015, exchanging low-vol exposure for a dividend quality screen. Its 0.85% fee is the highest expense ratio in the segment.
EMDG and EMHD will close on December 24, 2014.
DEM dominates in liquidity and is easily accessible to investors of all stripes. Most investors will encounter little difficulty trading EDIV, DVYE, or HILO. (Insight updated 10/20/17)
All Funds (6)
DEM $2.0 B 2003428700 Dominates in AUM and Liquidity
DVYE $371.64 M 371640720 Lowest Expense Ratio
EDIV $439.36 M 439356056.4 Mid- and Small-Cap Tilt
HILO $12.36 M 12358400 dividend focus
HDEE $2.41 M 2412024.12 currency hedged
SDEM $13.02 M 13024787.892252 new; trade with care
ETF.com Grade as 10/12/17
Equity: Emerging Markets - High Dividend Yield
ETF.com Efficiency Insight
The seven emerging market high-dividend funds differ significantly in assets and longevity. DEM reigns as the most established fund in the segment in both respects. EDIV and DVYE also boast
“DEM reigns as the most established fund in the segment” impressive asset tallies and at least a few years of trading history.
QDEM, which launched in early 2014, still has little more than seed capital, raising concerns about its future. HILO has recently seen an outflow of capital ahead of an index change, which is scheduled for January 2015. That's caused our closure risk algorithm to flag the fund with "medium" risk, but EGShares is unlikely to consider shuttering the fund until the new index has been allowed to stand on its own for some time.
The remaining two funds, EMHD and EMDG, will close on December 24, 2014.
On fees, DVYE leads with the lowest expense ratio in the segment, beating out DEM by a full 14 bps. Newcomer QDEM is not far behind, charging only 50 bps. Investors pay up for the specialized screening and weighting methodologies employed by HILO, EMDG, and EMHD—their 85 bp expense ratios are tied for highest in the segment. Meanwhile, DEM's 63 bps and EDIV's 59 bps are middle-of-the-road.
Emerging market ETFs often struggle to track their indexes tightly, and the funds in this segment are no exception. DEM particularly stands out for its loose tracking. DVYE has benefitted from securities lending income, which shows up in its tracking results.
On the tax front, none of the funds has paid out capital gains distributions in the last 3 years. (Insight updated 10/20/17)
ETF.com Tradability Insight
DEM is the liquidity king of the segment, with ample on-screen and block liquidity, for investors both small and large. Roughly $25M changes hands daily on a typical day, and spreads
“DEM is the liquidity king of the segment” average a segment-low 6 bps. Those looking to trade in size should be able to do so with ease through a liquidity provider, although creation costs are elevated.
Retail investors can also access EDIV, DVYE, and HILO without excessive cost, but larger investors face challenges. EDIV in particular boasts $3M in volume most days. But those trading blocks of any of these funds will face wide spreads, even with the help of a liquidity provider, and creates/redeems may adversely affect underlying prices.
QDEM, EMDG and EMHD will be difficult to access for small investors. They barely trade, and wide, unpredictable spreads are a given.Retail investors can also access EDIV, DVYE, and HILO without excessive costs, but larger investors face challenges. EDIV in particular boasts close to $2M in volume most days. But those trading blocks of any of these funds will face wide spreads, even with the help of a liquidity provider, and creates/redeems may adversely affect underlying prices.
QDEM, EMDG and EMHD will be difficult to access for small investors. They barely trade, and wide, unpredictable spreads are a given. (Insight updated 10/20/17)
ETF.com Fit Insight
All seven emerging market high-dividend ETFs deliver decent yields, but exposures vary widely. The portfolio yield before expenses for these funds is in the 3-7% range—except for
“Look beyond just yield when choosing among the funds here” EMDG, all are on par or better than our benchmark. It's important to look beyond just yield when choosing among the funds here. Few funds here score well in Fit, mostly due to methodologies that differ from our cap-weighted MSCI benchmark.
QDEM delivers the best neutral take on the segment, because its index is the same as our benchmark. The fund focuses on large-cap firms in dividend paying sectors—finance, energy, and utilities—in China, South Africa, and emerging Europe.
DEM is the most neutral of the established funds. Its large basket comes with noticeable but not excessive biases. DEM favors Russia at the expense of China. Its sector biases are muted and probably shouldn't scare off anyone looking for marketlike sector exposure.
EDIV has a narrower focus than DEM, holding about 1/3 as many issues. It favors small- and mid-sized firms as it chops large-cap exposure by more than half. EDIV downplays Russia and China—redistributing their weight to the rest of emerging Europe and Asia—and leans especially hard to Brazil. DVYE makes similar, though not identical, size and country bets.
HILO's unique focus on high-yielding, low-volatility stocks makes it a particularly poor Fit to our cap-weighted MSCI benchmark. HILO is highly concentrated, holding only 30 companies. The fund heavily overweights utilities and industrials while shying away from financials and energy. Be aware that the fund will change indexes in January 2015, focusing on dividend quality rather than low volatility.
EMDG looks for emerging market firms with a long history of dividend growth. EMHD's equal-weight take on the segment gives a boost to smaller sectors like utilities. Both funds are scheduled to close on December 24, 2014. (Insight updated 10/20/17)