WisdomTree rolls out emerging markets dividend growth ETF

Aug 7th, 2013 | By | Category: Equities

WisdomTree, a US-based exchange-traded fund (ETF) provider, has announced the launch of the WisdomTree Emerging Markets Dividend Growth Fund (DGRE) on the Nasdaq Stock Market.

WisdomTree rolls out emerging markets dividend growth ETF

The newly launched WisdomTree Emerging Markets Dividend Growth Fund has been listed on the Nasdaq Stock Market.
(© Copyright 2013, The NASDAQ OMX Group, Inc.)

The ETF is linked to the WisdomTree Emerging Markets Dividend Growth Index, a fundamentally weighted index that measures the performance of dividend-paying stocks with growth characteristics selected from the WisdomTree Emerging Markets Dividend Index.

The index is comprised of the top 50% of companies from this eligible universe with the best combined rank of growth and quality factors. The growth factor ranking is based on long-term earnings growth expectations, while the quality factor ranking is based on three-year historical averages for return on equity and return on assets. Companies are weighted in the index based on annual cash dividends paid.

Major holdings include Taiwan Semiconductor Manufacturing, Cia de Bebidas das Americas, MMC Norilsk Nickel, MTN Group and Vodacom Group. These top five holdings equate to 21.12% of the fund. The largest sectors are consumer staples with a weight of 19.05%, telecommunication services with 18.95%, financials with 13.28%, materials with 12.98% and consumer discretionary with 7.83%. Brazil has the largest representation with 14.53% followed closely by South Africa and Indonesia.

The parent WisdomTree Emerging Markets Dividend Index measures the performance of dividend-paying stocks selected from the following 19 emerging market countries: Argentina, Brazil, Chile, China, Czech Republic, Hungary, India, Indonesia, Israel, Malaysia, Mexico, Philippines, Poland, Russia, South Africa, South Korea, Taiwan, Thailand, and Turkey.

Commenting on the launch, Jeremy Schwartz, WisdomTree Director of Research, said: “While many dividend-focused indexes in emerging markets focus on yield and valuation, there is a dearth of options that focus on dividend growth. We believe that DGRE offers the investment flexibility to respond to dividend growth potential rather than historical dividend behaviour, aligning nicely with dividend behaviour of emerging market companies. And similar to our other dividend growth funds, we believe DGRE can provide access to some of the most attractive dividend growth opportunities available in the market.”

He added: “In contrast to many popular emerging markets equity strategies, DGRE has heavy exposure to the consumer sectors (staples and discretionary) – which tend to be more closely tied to the economic growth potential of domestic markets, as well as defensive sectors – which have historically lower volatility. Moreover, DGRE is underweight the ‘BRIC’ countries – Brazil, Russia, India, China – and holds some of its largest weights in the ‘MIT’ countries – Mexico, Indonesia and Thailand – again, which differs from traditional, comparable investments.”

DGRE has an expense ratio of 0.63% and is WisdomTree’s fourth dividend growth ETF, following the WisdomTree US Dividend Growth Fund (DGRW), the WisdomTree US SmallCap Dividend Growth Fund (DGRS) and the WisdomTree Global ex US Growth Fund (DNL).

In terms of alternatives, the nearest competitor to WisdomTree’s new fund is the EGShares Emerging Markets Dividend Growth ETF (EMDG) from Emerging Global Advisors. This fund, which is listed on the NYSE Arca, provides exposure to 50 emerging market companies that have demonstrated an ability to consistently grow dividends. The eligibility criteria for this fund include a series of screens to ensure dividend sustainability and growth.

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