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?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Blackrock (NYSE:BLK), and has been able to amass over $834.28 million, which makes it one of the larger ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for DVYE are 0.49%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 5%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Evraz (EVR) accounts for about 2.64% of the fund's total assets, followed by Indiabulls Housing Finance Ltd (IBULHSGFIN) and Novolipetsk Steel Gdr (NLMK).
DVYE's top 10 holdings account for about 18.99% of its total assets under management.
Performance and Risk
The ETF has added about 5.57% and is up about 21.06% so far this year and in the past one year (as of 03/11/2021), respectively. DVYE has traded between $25.94 and $39.26 during this last 52-week period.
The ETF has a beta of 0.91 and standard deviation of 22.19% for the trailing three-year period, making it a medium risk choice in the space. With about 124 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Emerging Markets Dividend ETF is not a suitable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index and the iShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index. Vanguard FTSE Emerging Markets ETF has $75.10 billion in assets, iShares Core MSCI Emerging Markets ETF has $75.94 billion. VWO has an expense ratio of 0.10% and IEMG charges 0.11%.
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.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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