iShares Launches Emerging, Asia Payout ETFs

February 24, 2012

iShares takes an international plunge into the world of dividend paying ETFs.

iShares, the world’s largest sponsor of ETFs, today rolled out two dividend-focused ETFs that canvass emerging markets as well as Asia-Pacific equities, the latest to target investor appetite for income-generating stocks.

Both the iShares Emerging Markets Dividend Index Fund (NYSEArca: DVYE) and the iShares Asia/Pacific Dividend 30 Index Fund (NYSEArca: DVYA) are linked to Dow Jones benchmarks, and each has an annual expense ratio of 0.49 percent.

The funds join a growing roster of payout-seeking ETFs that promise investors steady income at a time when stock prices have been volatile and bonds unusually low-yielding. Many ETF providers have been stuffing the regulatory pipeline with dividend-focused ETFs in an effort to snatch the demand for such instruments.

Still, strategies that deliver a blend of dividend-paying equities with the prospective elements associated with developing economies are still relatively rare, even if their projected returns have exceeded those of the S&P 500 in the past year, according to iShares data.

DVYE, Cheapest In Class

iShares’ DVYE, for instance, while set to face the sizable $3.26 billion WisdomTree Emerging Markets Equity Income Fund (NYSEArca: DEM), can count its direct competitors on one hand. The fund is also the cheapest of its kind.

DVYE’s expense ratio is less than DEM’s 0.63 percent price tag, and is also cheaper than the one-year-old $213 million SPDR Emerging Markets Dividend (NYSEArca: EDIV), which has a 0.59 percent expense ratio.

Even the EGShares Low Volatility Emerging Markets Dividend ETF (NYSEArca: HILO), which adds a volatility screen to the strategy, costs more at 0.85 percent.

DVYA’s Targeted Exposure

By comparison, iShares Asia Pacific fund, DVYA, is even more unique, serving up targeted exposure to dividend-paying stocks from companies in Australia, Hong Kong, Japan, New Zealand and Singapore in a mix that is a first for U.S. investors. The fund, too, is relatively price-competitive.

The $710 million SPDR International Dividend (NYSEArca: DWX), with a 0.45 percent annual expense ratio, offers some overlapping exposure to iShares’ DVYA as far as country exposure. However, most international dividend ETFs on the market today from providers such as WisdomTree, State Street Global Advisors, Invesco PowerShares, Guggenheim and First Trust are broader in scope.

Focus On Australia

DVYA tracks a Dow Jones index that taps into high-dividend-paying stocks in Australia, Hong Kong, Japan, New Zealand and Singapore. It rebalances annually.

The fund, comprised of 30 names, allocates roughly a quarter of its portfolio to financials, while consumer services and telecommunications each take up just under 20 percent of the pie, according to information on iShares’ website.

DVYA’s country allocation is heavily tilted toward Australia, which represents nearly 45 percent of the portfolio, with Hong Kong coming second at 21 percent. At the other end is Japan, snagging less than a 7 percent share of the exposure.

Australia is also the focus of a WisdomTree dividend ETF, “AUSE”—a fund that taps exclusively into that country’s high-payout names.  Although AUSE has been around since 2006, it has gathered an unimpressive $57 million in assets.

Emerging Market Breakdown

The new emerging markets ETF, DVYE, focuses on the top-100 dividend-paying emerging market companies, in a mix that’s rebalanced annually, iShares said on its website.

The fund allocates nearly a quarter of its portfolio to Taiwanese securities, and also has Brazilian and South African equities, each of the latter snagging more than 10 percent of the mix.

Countries like Turkey, Malaysia, Thailand, Czech Republic, Indonesia and Hong Kong also make the cut, at about 4 percent of the pie.

China, however, is bundled with nine other countries under the “other” country allocation tag iShares uses to denote smaller allocations, representing less than 3 percent of the portfolio.

DVYE has telecommunications, industrials and basic materials as its largest sector allocations, each representing around 15 percent of the portfolio.



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