Is iShares Emerging Markets Dividend ETF a Strong ETF Right Now?

What Are Smart Beta ETFs?

The iShares Emerging Markets Dividend ETF DVYE made its debut on 02/23/2012, and is a smart beta exchange traded fund that provides broad exposure to the Broad Emerging Market ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Blackrock BLK. It has amassed assets over $673.93 million, making it one of the larger ETFs in the Broad Emerging Market ETFs. Before fees and expenses, this particular fund seeks to match the performance of the Dow Jones Emerging Markets Select Dividend Index.

The Dow Jones Emerging Markets Select Dividend Index measures the performance of the companies in emerging market countries that have provided relatively high dividend yields on a consistent basis over time.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.49%, making it on par with most peer products in the space.

DVYE's 12-month trailing dividend yield is 8.33%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Petroleo Brasileiro Pref Sa (PETR4) accounts for about 5.91% of the fund's total assets, followed by Cia Vale Do Rio Doce Sh (VALE3) and Cez (CEZ).

Its top 10 holdings account for approximately 29.83% of DVYE's total assets under management.

Performance and Risk

Year-to-date, the iShares Emerging Markets Dividend ETF has added about 5.46% so far, and is up roughly 20.01% over the last 12 months (as of 06/13/2024). DVYE has traded between $22.96 and $29.60 in this past 52-week period.

The ETF has a beta of 0.82 and standard deviation of 17.37% for the trailing three-year period, making it a medium risk choice in the space. With about 154 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Emerging Markets Dividend ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core MSCI Emerging Markets ETF IEMG tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF VWO tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $78.44 billion in assets, Vanguard FTSE Emerging Markets ETF has $78.69 billion. IEMG has an expense ratio of 0.09% and VWO charges 0.08%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs.

To read this article on Zacks.com click here.