February 28, 2012 | includes: DVYA, DVYE
iShares continued to aggressively expand its ETF lineup last week with the addition of two new ETFs focusing on dividend-paying stocks in international markets. The iShares Emerging Markets Dividend Index Fund (DVYE) will combine two asset classes that have become tremendously popular in recent years, targeting stocks from emerging markets that deliver attractive dividend yields. The iShares Asia/Pacific Dividend 30 Index Fund (DVYA) will focus on dividend-paying securities from developed markets in the Asia Pacific region, including Australia, Hong Kong, and Japan.
Interest in dividend-paying stocks has been surging over the past few years, the result of both a flight to stability and an increased desire to achieve meaningful yields from the equity side of a portfolio. The team at Dividend.com has put together a robust library of information that explains the appeal of dividend-paying stocks in any environment–and especially one where interest rates continue to hover near zero.
Many investors have elected to go beyond purchasing individual stocks, and embraced ETFs as efficient tools for achieving low cost, low maintenance exposure to dividend-focused strategies. Currently, there are nearly four dozen dividend ETFs available to U.S. investors, including products that target consistent dividend payers and those that target the highest possible yields [see SDIV vs. VIG: A Tale Of Two Dividend ETFs].
Under The Hood: DVYE
DVYE is linked to the Dow Jones Emerging Markets Select Dividend Index, a benchmark that consists of about 100 stocks from developing economies. The underlying securities are selected on the basis of dividend yield, subject to certain screens. The underlying index includes allocation to almost 20 different emerging markets, with Taiwan (24%) and Brazil (14%) getting the biggest allocations. Beyond Brazil, exposure to the BRIC is relatively light; Russia, India, and China combine to account for only about 5% of the portfolio. In other words, DVYE may have appeal as a way to diversify emerging market exposure away from the "Big Four" and into smaller developing economies that may maintain significant potential for capital appreciation over the long term.
DVYE joins a number of existing ETFs that focus on dividend-paying stocks in emerging markets. The most popular choice in this segment of the market is the WisdomTree Emerging Markets Equity Income Fund (DEM), which has more than $3 billion in assets. Other products with similar investment objectives include the EGShares Low Volatility Emerging Markets Dividend ETF (HILO) and SPDR S&P Emerging Markets Dividend ETF (EDIV).
DVYE will charge an expense ratio of 0.49% [see the DVYE fact sheet].
Under The Hood: DVYA
This ETF targets the developed economies of the Asia Pacific region through the Dow Jones Asia/Pacific Select Dividend 30 Index, a benchmark of about 30 high dividend-paying stocks. About 45% of the portfolio is allocated towards Australian stocks, followed by Hong Kong (21%), Singapore (17%), New Zealand (10%), and Japan (7%). From a sector perspective, DVYA is tilted towards financials (25%), consumer services (19%), and telecoms (18%) [see Asia-Centric ETFdb Portfolio].
DVYA is the first ETF to offer broad-based exposure to the developed Asia Pacific region while also targeting dividend-paying stocks. WisdomTree offers an Australia Dividend ETF (AUSE), and PowerShares has a RAFI product (PAF) that focuses on the region but excludes Japan [see the DVYA fact sheet].
DVYA also comes in with an expense ratio of 0.49%.
Disclosure: No positions at time of writing.
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