High-Yield ETF’s Recent Loss Provides Opportunity

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

Although emerging markets do not get much press these days, thanks in part to bad returns in 2018, they’re off to a great start this year.

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So perhaps it is not surprising that iShares Emerging Markets Dividend ETF (DVYE) is a top performer among the dozens of income-generating strategies I track. It is up over 3% so far in 2019.

One of the larger funds among the broad emerging market ETFs, DVYE has $530 million in assets that are managed by BlackRock. The iShares Emerging Markets Dividend ETF is down since the beginning of 2018 by almost 6%, but it’s still up over 30% since 2016.

Launched in 2012, DVYE is a smart-beta ETF, which by definition considers factors such as size, value and volatility instead of the typical cap-weighted index strategy, making it an ideal ETF for investors to maximize return and minimize risk.

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This fund tracks the Dow Jones Emerging Markets Select Dividend Index — a dividend-weighted index of high-dividend-paying emerging markets companies, according to StockInvestor.com.

A recent Zacks article listed DVYE as a good high-yield ETF to own, since it paid a total of $2.13 a share in dividends in 2018 on a quarterly basis to produce a yield of more than 5.50%.

The focus of the iShares Emerging Markets Dividend ETF is much narrower compared to other emerging markets ETFs that track large-cap companies in market-cap-weighted indices by holding 100 of the highest-yielding stocks from emerging markets.

This fund’s top holdings, comprising 19.21% of its total assets, are Farglory Land Development Co. Ltd. (5522.TW), Seaspan Corp. (SSW), Severstal PAO (CHMF), Highwealth Construction Corp. (N/A), ALROSA PJSC (ALRS), Arcadyan Technology Corp. (3596.TW), Barwa Real Estate Co. QSC (BRES), Energy Company of Minas Gerais Participating Preferred (CMIG4.SA), Tatneft PJSC (TATN) and Novolipetsk Steel PJSC GDR (NLMK).

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Chart courtesy of Stockcharts.com

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Long-term investors who are looking for exposure to emerging markets should consider this fund, which also is a good way to add international diversity to a portfolio. As always, investors should exercise their due diligence in deciding whether DVYE is a worthwhile investment.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

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