Dividend stocks can provide buffers against volatility and that is true of ex-US dividend payers as well. For investors looking for compensation for the risks associated with emerging markets investing, the ProShares MSCI Emerging Markets Dividend Growers ETF (CBOE: EMDV) is a solid exchange traded fund (ETF) to consider.
EMDV follows the MSCI Emerging Markets Dividend Masters Index, which targets MSCI Emerging Market components that have increased dividend payments each year for at least seven consecutive years.
“There are lesser-known stocks in emerging markets that may seem more risky, but in fact are developing a strong history of delivering shareholder value through consistent – and growing – dividends,” according to U.S. News & World Report.
In dollar terms, China is the largest emerging markets dividend payer and one of the emerging world’s most reliable sources of dividend growth. Many emerging markets dividend exchange traded funds (ETFs), including the aforementioned EMDV, reflect as much. EMDV allocates nearly 30% of its weight to Chinese dividend stocks.
What is important to investors is how funds approach Chinese and other emerging markets dividend payers.
“Most of the high yielders are emerging-market banks, natural resources and energy,” reports Forbes. “Energy tends to be the most interesting because they are cyclical in nature, and their main commodity, oil, and gas, is priced in dollars. So if foreign oil and gas stocks are down in the dumps, there is a chance that it is cyclical, and it represents a good entry point for investors.”
EMDV is not a high-yield strategy, but the fund does devote over a quarter of its weight to the financial services sector. However, the fund features no energy exposure and a weight of just 3.85% to materials stocks.
Dividend growth rather than high yield can be a potent, less risky long-term income strategy. Company stocks that issue high dividend yields can be masking their distressed books or may not be sustainable and are heading for dividend cuts.
EMDV is up 10.37% year-to-date.
For more on core investing strategies, please visit our Core ETF Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
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