The new fund, EGShares Emerging Markets Dividend Growth ETF (EMHD), tracks the FTSE Equal Weighted Emerging All Cap ex-Taiwan Diversified Dividend Yield 50 Index, a benchmark co-developed by EGA and FTSE that provides exposure in developing world companies.
The index screens the FTSE Emerging All Cap ex-Taiwan Universe and equal weights 50 stocks that have consistently generated high-income for their shareholders after screening for liquidity. While equal weighting ensures each index component is allocated 2 percent on rebalancing dates annually, the index excludes the least-capitalized dividend-paying companies.
The index considers a number of parameters that includes both the ability and willingness of the index-constituents to pay dividends. The screening requirements include payment of dividend in each of the last three years, a dividend yield that is less than 20 percent in the trailing 12 months and a dividend payout ratio that is less than 100 percent. The outcome is a reported yield of 8.8 percent for the underlying benchmark.
Like many of its previous ETFs, EMHD is biased toward BRIC countries. Brazil occupies the top slot with nearly 21 percent weight, followed by South Africa (18.07 percent) and China (14.70 percent). Turkey, which generally doesn’t feature in Emerging Market funds, occupies the fourth spot (13.86 percent). The biggest surprise of the pack, however, is Pakistan with a meaty 8.45 weight.
Financials and utilities receive the maximum exposure among all the sectors with 20.84 and 20.32 percent weightings, respectively. This is understandable, since both the sectors typically pay large dividends. Basic Materials (16.40 percent), telecommunications (12.26 percent) and consumer goods (10.10 percent) are the three other sectors in the top five.
EMHD has an annual expense ratio of 0.85 percent.
Disclosure: No holdings