NEW YORK ( TheStreet ) -- With investors fretting about the Ukraine crisis and China's slowing economy, most emerging-markets exchange-traded funds have sunk.
Dividend funds have proved particularly disappointing. During the past year, SPDR S&P Emerging Markets Dividend (EDIV) lost 14.5%, while WisdomTree Emerging Markets Equity Income (DEM) dropped 10.8%. In contrast the broad-based iShares MSCI Emerging Markets (EEM) lost 4.7%, and the S&P 500 gained 23.3%.
After the battering, the dividend ETFs may be intriguing holdings for contrarians. The WisdomTree ETF sells for a forward price-earnings ratio of 7.5, about half the figure for the S&P 500. The dividend funds also offer compelling yields. SPDR S&P Emerging Markets Dividend yields 6.3%, compared with a yield of 2% for the S&P 500.
If you decide to try bottom fishing, keep in mind that dividend stocks in the emerging markets are different from their U.S. counterparts. In the U.S., many blue chips pay dividends that consistently rise. Managements cut dividends only in extreme circumstances. Solid American dividend stocks are steady performers, shining in downturns.
But in the emerging markets, dividend payers are not necessarily steady choices. Some companies regularly raise and lower dividends. Dividend payers don't necessarily do well in downturns.
Still, the emerging-markets ETFs can be compelling because they tend to focus on the sectors that are the most unloved. After excluding small stocks, the SPDR fund managers pick the 100 stocks with the highest dividend yields. The portfolio gives the most weight to the highest-yielding stocks.