2 Emerging Markets Dividend ETFs to Watch

NEW YORK ( TheStreet) -- We have endured a few hiccups, but the bulls have shown an unwillingness to give up the reigns as we head towards the end of the first quarter of 2012.

This relentless march higher has helped restore some confidence and drive investors back into riskier asset classes and corners of the globe. While encouraging, there are still investors who remain on a hair-trigger. In the event of a shakeup, these individuals will be quick to express their doubts and scramble for the comfort of safe haven asset classes.

Fortunately for these individuals, the expansion of the ETF industry has led to the development of products designed to help them stay invested while protecting against an upheaval.

For instance, by turning to a product like the WisdomTree Emerging Markets Equity Income ETF ( DEM), it is possible to gain exposure to the inherently volatile developing world.

In addition to tracking companies from popular nations like Brazil, Taiwan, and Turkey, however, the fund's dedication to income-earning names will ensure a welcomed line of defense against global economic headwinds.

Over the past year period, DEM's yield-focused take on the developing world has paid off, helping the fund beat out non-dividend-focused emerging market products like the Vanguard Emerging Market ETF ( VWO) and the iShares MSCI Emerging Markets Index Fund ( EEM) by a comfortable margin.

However, like domestic dividend funds such as the iShares Dow Jones Select Dividend Index Fund ( DVY), DEM has lagged against these plain-vanilla instruments in 2012's risk-on environment.

Despite its recent spurt of subpar action, fund companies are increasingly warming up to this investment strategy. During the final days of February, ETF leader Blackrock ( BLK) announced that it was venturing into this corner of the emerging world with its own fund: the iShares Emerging Markets Dividend Index Fund ( DVYE).

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DVYE is still young, but the fund is definitely worth keeping an eye on. Although the fund mimics DEM's overall strategy, it is clear that the newcomer offers a new take. There are a number of clear differences including total holdings, but the most notable dissimilarities can be seen in the two funds' sector breakdowns.

Financials represent major slices of both products. However, DEM is by far the leader, allocating over a quarter of its assets to this sector. DVYE, meanwhile, sets aside less than 15% of its portfolio here. Technology represents another clear divergence. In DEM, IT companies represent close to 14% of the assets; the sector accounts for only 6% of DVYE.

DVYE goes further than offering a new take on this corner of the dividend universe in order to contend with DEM, though. The newcomer goes for the jugular, slashing i expenses in order to draw crowds of cost-conscious investors. With an expense ratio of 0.49%, DVYE is considerably cheaper than its veteran alternative.

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For now, I urge investors to continue to turn to DEM to get their emerging market dividend fix. DVYE has gathered steam in its opening weeks of trading. However, like any new product, the fund will take time to secure its spot in the highly-competitive ETF universe. DEM poses as an especially challenging adversary. With over $3 billion in assets under management, the fund is one of the largest in the business.

-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion Money Management owned the Vanguard Emerging Market ETF, iShares MSCI Emerging Markets Index Fund and iShares Dow Jones Select Dividend Index Fund.

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