Developing economies remain a compelling avenue for income ideas and one of the more practical ideas for tapping that income stream is the ALPS Emerging Sector Dogs ETF (NYSEArca: EDOG).
EDOG, which debuted over six years ago, tracks the performance of the S-Network Emerging Sector Dividend Dogs Index. The index is comprised of the highest paying stocks, or “Dividend Dogs,” from the S-Network Emerging Markets Index, which holds large-cap, emerging market stocks. The Dividend Dogs include the five stocks in each of the ten Global Industry Classification Standard sectors that make up the S-Network Emerging Markets.
“Emerging markets aren’t among the first places investors typically think of when scanning for dividend stocks, but they can offer reliable and growing payers,” reports Lawrence Strauss for Barron’s. “It’s important to tread carefully, however, given risks such as currency fluctuations and less rigorous corporate governance in certain cases.”
EDOG ETF for Cash Assets
The need for global income is more readily apparent as U.S. companies are slashing their dividends in order to preserve cash thanks to the coronavirus pandemic. As more companies are looking to stymie the effects of the pandemic by cutting dividends, investors can look to global yield opportunities. Seeking fixed income opportunities around the globe could help yield-hungry investors satiate their appetites while sectors like manufacturing return to normal.
Some emerging markets dividend payers often feature larger yields than their U.S. counterparts, an assertion proven by comparing large- and mega-cap dividend stocks from familiar dividend sectors such as consumer staples, energy, financial services, and telecommunications. EDOG’s high-yield offering stands out in an emerging markets space populated by marginal payouts.
“Attractive yields can be hard to come by in emerging markets, however. About 35% of the stocks in the MSCI Emerging Markets Index yield below 0.5%,” according to Barron’s.
With its equal-weight methodology, EDOG is able to sport an above-average weight to tech compared to other emerging markets dividend ETFs and a combined 30% allocation to the defensive consumer staples, healthcare, and utilities sectors.
Other emerging markets dividend ETFs include the ProShares MSCI Emerging Markets Dividend Growers ETF (CBOE: EMDV), iShares Emerging Markets Dividend ETF (DVYE) and the WisdomTree Emerging Markets Equity Income Fund (NYSEArca: DEM).
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