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A Focus on Emerging Market Dividends

The S&P Global Market Intelligence Focus ETF for April 2016 is SPDR S&P Emerging Markets Dividend (EDIV). In ranking approximately 875 equity ETFs, we assess the valuation and risk of an ETF’s holdings as well as incorporating ETF-level research such as technical analysis and trading costs.

The S&P Dow Jones index behind EDIV nerally includes common stocks from emerging market countries that offer high dividend yields. To be included in the Index, stocks must have a total market capitalization greater than $1 billion, with a float-adjusted market cap greater than $300 million and a three-month average daily value traded greater than $1 million as of the rebalance reference date. Additionally, stocks must have positive 3-year earnings growth and profitability. Stocks are weighted by annual dividend yield.

Sam Stovall, S&P Global Market Intelligence equity strategist, notes that low U.S. inflation and fewer expected rate hikes by the Federal Reserve has helped both emerging market and dividend-paying stocks during the first quarter of 2016. S&P Global Market Intelligence operates independently from S&P Dow Jones Indices.

Indeed, EDIV’s 13% year-to-date-gain through March 30 is well ahead of the 6.5% return for the iShares MSCI Emerging Markets (EEM). 

Low U.S. inflation and fewer expected rate hikes by the Federal Reserve has helped both emerging market and dividend-paying stocks.
Meanwhile, EDIV’s 12-month yield of 5.4% was more than double that of both EEM (2.7%) though in many cases S&P Global Market Intelligence thinks the constituents have a consistently strong record of dividends and earnings.

For example, MTN Group, the South African telecom services provider, is a top-10 holding. The stock has a 10% yield. However, the company has an above average Quality Ranking of A- according to S&P Global Market Intelligence.

From a country perspective, EDIV happens to be overweighted all of the aforementioned top performers year to date (such as Brazil and South Africa), and underweighted the bottom performers (China and South Korea). Naturally, the ETF’s exposure is due to passively tracking an index and past performance is not necessarily indicative of future results.

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 The average daily volume for EDIV in the past month has climbed to 202,000 shares in the past month, up from 121,000 looking back over the past six months. The ETF has positive overall cost factors as it trades with tight $0.01 bid/ask spread and a 0.49% expense ratio.

Follow me @ToddSPGlobal to keep up with mutual fund and ETF trends.

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