So what should one think about the underachievement in the emerging market dividend space? Is it merely a matter of patience? Or are these ETFs tracking unreliable indices with questionable risk-reward benefits?
Conceptually, I like "EM Div" ETFs. Yet, one reason they may not be as attractive as their domestic counterparts are the comparable yields. The annualized dividend yield in this space is not significantly higher than emerging market sovereign debt. That fact may contribute to the enormous interest in
PowerShares Emerging Market Sovereign
In contrast, most of the popular U.S. dividend ETFs have yields that are close to two times the 1.6%-yielding 10-year Treasury.
Granted, for many folks, Vanguard Emerging Markets ETF may not be worthy of the volatility here in 2012; not everyone is going to jump through hoops for 2.2% annualized. Nevertheless, there are emerging market investments with better-than-average dividend production and less volatility than VWO or SPY.
iShares MSCI Malaysia
has a beta of 0.79 and an annual dividend yield of 3.7%.
Long-time readers know that
I discuss Malaysia
with a great deal of frequency. Not only is the dividend more attractive than the broader emerging market benchmark, but the EWM:VWO price ratio demonstrates significant relative strength.
If you're going to
select an emerging market investment
or you're going to look for yield to offset the risk of ownership, EWM is tough to beat.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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