Home etftrends.com Emerging Markets Quality Dividend Growth Rebalance: Fall 2023

Emerging Markets Quality Dividend Growth Rebalance: Fall 2023

By Matt Wagner, CFA
Associate Director, Research

In May of this year, WisdomTree rebalanced the WisdomTree Emerging Markets Quality Dividend Growth Fund (DGRE) completely away from China, bringing its 29% weight in China at the time down to 0%.

The decision was made primarily to mitigate the Fund’s exposure to escalating geopolitical tensions between China and the U.S., and to give another asset allocation option for broad emerging markets exposure without a roughly one-third weighting to China.

For more background on this decision, read this blog post.

We rebalanced DGRE again this month, maintaining its zero exposure to China.

Without that exposure to China, the Fund’s biggest weight at 29% is in India, a nearly 15% over-weight in the country relative to its exposure in the MSCI Emerging Markets Index.

Supporting this active country exposure relative to the benchmark, my colleagues wrote an excellent piece this summer on why India may be at the cusp of an economic boom.

Top 10 Country Weights

The Investment Process

DGRE is a rules-based active ETF. The Model selects roughly 250–300 dividend-paying constituents based on characteristics of dividend sustainability (dividend coverage ratio greater than one), higher profitability metrics (quality) and premium trailing dividend growth.

The below table shows the top 10 DGRE holdings before (old) and after (new) the rebalance.

As mentioned in a previous post, Taiwan Semiconductor—maintained as the top holding in DGRE—has consistently been one of the fastest dividend growers globally over the last several years, growing at 7% annualized over the last five years.

Top 10 Holdings

For current holdings, click here.

The weighting process for DGRE is modified market-cap to give greater weight to companies with higher scores on quality and dividend growth. To reduce turnover, constituents that are maintained in the basket are held at a weight that is roughly equal to what it was prior to the rebalance.

The one-way turnover for the Fund at the rebalance was just around 19%.

After the rebalance, DGRE’s dividend yield is slightly lower, and its price-to-earnings ratio is almost unchanged at a little more than one times below that of the MSCI EM Index.

Further, as the process favors quality companies earning a high return on equity and assets, the return-on-equity advantage over the broad MSCI EM Index was improved while the return on assets was little changed.

Fundamentals Comparison

For the most recent month-end performance and 30-Day standardized yield click here.

From a sector perspective, the rebalance increased the Fund’s weight in Financials (+3%) and Communication Services (+2%) and trimmed weight from Information Technology (-2%).

Sector Exposures


Emerging markets equities have repeatedly disappointed U.S. investors over the last decade.

The rising political tensions between the U.S. and China have made some investors wary of investing in emerging markets altogether given the outsized weight of China in broad benchmarks.

For investors aiming to mitigate that risk, DGRE offers a compelling solution by way of a basket of high-quality, dividend-paying companies.

Important Risks Related to this Article

There are risks associated with investing including possible loss of principal. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Fund’s focusing on a single sector generally experience greater price volatility. Investments in emerging, offshore or frontier markets are generally less liquid and less efficient than developed markets and are subject to additional risks, such as of adverse governmental regulation, intervention and political developments. Due to the investment strategy of this Fund it may make higher capital gain distributions than other ETFs. Please read the Fund’s prospectus for specific details regarding the Fund’s risk profile.

Originally published by WisdomTree on October 26, 2023. 

For more news, information, and analysis, visit the Modern Alpha Channel.

U.S. investors only: Click here to obtain a WisdomTree ETF prospectus which contains investment objectives, risks, charges, expenses, and other information; read and consider carefully before investing.

There are risks involved with investing, including possible loss of principal. Foreign investing involves currency, political and economic risk. Funds focusing on a single country, sector and/or funds that emphasize investments in smaller companies may experience greater price volatility. Investments in emerging markets, currency, fixed income and alternative investments include additional risks. Please see prospectus for discussion of risks.

Past performance is not indicative of future results. This material contains the opinions of the author, which are subject to change, and should not to be considered or interpreted as a recommendation to participate in any particular trading strategy, or deemed to be an offer or sale of any investment product and it should not be relied on as such. There is no guarantee that any strategies discussed will work under all market conditions. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This material should not be relied upon as research or investment advice regarding any security in particular. The user of this information assumes the entire risk of any use made of the information provided herein. Neither WisdomTree nor its affiliates, nor Foreside Fund Services, LLC, or its affiliates provide tax or legal advice. Investors seeking tax or legal advice should consult their tax or legal advisor. Unless expressly stated otherwise the opinions, interpretations or findings expressed herein do not necessarily represent the views of WisdomTree or any of its affiliates.

The MSCI information may only be used for your internal use, may not be reproduced or re-disseminated in any form and may not be used as a basis for or component of any financial instruments or products or indexes. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each entity involved in compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties. With respect to this information, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including loss profits) or any other damages (www.msci.com)

Jonathan Steinberg, Jeremy Schwartz, Rick Harper, Christopher Gannatti, Bradley Krom, Kevin Flanagan, Brendan Loftus, Joseph Tenaglia, Jeff Weniger, Matt Wagner, Alejandro Saltiel, Ryan Krystopowicz, Brian Manby, and Scott Welch are registered representatives of Foreside Fund Services, LLC.

 WisdomTree Funds are distributed by Foreside Fund Services, LLC, in the U.S. only.

You cannot invest directly in an index.

newETFs.io respects the hard work of others and gives all credit to the remarkable folks at ETFTrends.com. This excerpt/article was pulled from their RSS feed; click here to view the original. Please note that on occasion, the RSS feed will not have the author. When this happens this site defaults the author to "News". Make no mistake, this excerpt/article was not created by newETFs.io, it was simply shared with you.