DEM Beats Out VWO And EEM

June 08, 2012


The SPDR S&P Emerging Markets Dividend ETF (NYSEArca: EDIV) is also worth mentioning here. The dividend-weighted fund launched in February 2011, and while it doesn't have a long track record yet, it also beat out VWO and EEM over the past one-year period.

For emerging markets dividend plays, the iShares Emerging Markets Dividend Index Fund (NYSEArca: DVYE) is also available. The fund was only launched this past February, but it's one to watch.

But beyond simply broad-based funds, yield-hungry investors might also be interested in the WisdomTree Emerging Markets SmallCap Dividend Fund (NYSEArca: DGS), which was the first small-cap-focused emerging markets ETF to launch.

DGS also sports a handsome dividend yield, a trailing 12-month yield of 3.84 percent and a 30-day SEC yield of 7.63 percent.

Plus, DGS' small-cap tilt gives the fund significant exposure to industrials and the consumer side of emerging markets, as opposed to large, state-owned financial and energy companies that play a heavy hand in broad, cap-weighted funds like VWO and EEM.


Sector Weightings (in %)
EEM (MSCI EM Index) DGS (WisdomTree Emerging
Markets SmallCap Dividend Index)
Financials 24.0 21.5
IT 13.9 13.4
Energy 12.9 1.6
Materials 12.1 10.0
Telecom 8.1 1.3
Utilities 3.8 6.7
Consumers (Staples and Cyclicals) 16.6 21.1
Industrials 6.8 19.1
Other 1.8 5.3

Source: Issuser websites


And once again, it's outperformed both VWO and EEM over the past three-year period.



Source: Bloomberg


Now it might look like I'm picking on VWO and EEM a bit here, but because they're $54 billion and $33 billion goliaths in the emerging markets space, they've become the standard by which emerging markets ETFs are now measured against.

And while DEM's $3.4 billion in assets is nothing to scoff at, compared with VWO and EEM, the fund looks underappreciated.

This is surprising considering all the attention that dividend ETFs have gotten over the past year. Also, considering the numerous emerging markets debt ETFs recently launched, not much is talked about in terms of searching for yield in emerging markets equities.

Perhaps investors have been obsessed with emerging markets debt funds and overlooked the equity space.

Or perhaps DEM got overlooked as everyone was focused on which was better—VWO or EEM—two funds tracking the same index, while DEM was beating both funds hand over fist. Over three years, DEM outperformed both by more than 20 percent.

Still, for those wanting emerging markets equity exposure, DEM, as well as DGS, are solid plays that pay out handsome dividends.

These are just a few more alternative choices to VWO and EEM that emerging markets investors might consider before blindly chasing the most popular funds.


Find your next ETF

Reset All