When you think of emerging markets, what comes to mind? Growth opportunities are likely first on the list … followed ever so closely by stomach-churning volatility.
What you probably don’t think about is income. But even in EMs, investors can dredge up some considerable dividend yield.
We all know the basic emerging market investment thesis: These “emerging” countries typically feature much more robust economic growth and quickly expanding middle classes. As a result, the companies there are expected to rapidly grow as they both feed off that greater economic pie, and as their operations become international in nature, building revenues around the rest of the world. Better yet, EMs are a diversified investment, offering returns that aren’t strongly tethered to the U.S. stock market.
With the rewards come the risks: Emerging countries can feature a number of landmines, including less stable geopolitical situations, stock market over-reliance on companies tied to commodities such as oil or gold, less regulated markets and more.
It’s no surprise, then, that dividend yield is one of the last goals on our minds when it comes to EM investments. But while many emerging-market businesses are indeed plowing all available cash into growth, EMs still offer many of the same yield opportunities as developed markets, be it high-dividend stocks in sectors like energy, telecom and real estate, or even junk bonds.
Today, we’ll look at a trio of ETFs that leverage emerging markets with dividends in mind.