WisdomTree's Newest Emerging Market ETF

| About: WisdomTree Emerging (DVEM)

Summary

In April, WidsomTree launched two new dividend oriented ETFs, one of them being DVEM, an emerging markets dividend fund.

The expense ratio is a little lower than average but not terribly low either.

Vanguard's emerging markets ETF is the best choice for this sector out of all the choices.

This year has seen new choices available for investors seeking international dividend stocks within an ETF. The reason that companies are creating so many new products with this same theme is most likely due to the higher yields available in international markets. As I pointed out in this previous article, the S&P average yield is near historical low. This means that people who initially got out of fixed income investments and moved to equities in search of yield could likely be continuing on this path by leaving the domestic markets in search of higher yields internationally.

Below is a chart comparing the performance of one of the biggest EM ETFs and SPY, first starting from 2005 and then starting from the bottom of the financial crisis in 2009.

Click to enlarge

Click to enlarge

So to help meet this demand for income, WisdomTree's latest ETF, the WisdomTree Emerging Markets Dividend ETF (BATS:DVEM), offers an emerging market dividend theme so let's take a look at this new fund which was launched on April 7th this year.

This ETF tracks a proprietary index, the WistomTree Emerging Markets Dividend Index. Below shows how this index performed against the standard index for emerging markets, the MSCI emerging markets index.

Source

The index and ETF holdings consist of 58.51% large-cap stocks, 30.92% in mid-cap stocks, and 10.56% in small-cap stocks. Below is more information on the sectors, companies, and countries represented in the holdings.

Sectors

Weighting

Financials

21.85%

Information Technology

14.99%

Telecommunication Services

11.57%

Energy

11.56%

Materials

9.97%

Consumer Staples

9.00%

Consumer Discretionary

6.78%

Industrials

5.86%

Utilities

4.71%

Real Estate

2.88%

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Top Ten Holdings

Weighting

China Construction Bank Corp. (OTCPK:CICHY)

4.01%

China Mobile Ltd. (OTCPK:CHLKF)

3.81%

Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM)

3.02%

Ambev S.A. (NYSE:ABEV)

2.24%

Samsung Electronics Co. Ltd. (OTC:SSNLF)

2.15%

CNOOC Ltd. (NYSE:CEO)

1.70%

Lukoil PJSC ADR (OTCPK:LUKOY)

1.58%

MMC Norilsk Nickel PJSC ADR (OTCPK:NILSY)

1.56%

Gazprom OAO (OTCQX:GZPFY) (OTCPK:OGZPY)

1.50%

Industrial & Commercial Bank of China Ltd. (OTCPK:IDCBF) (OTCPK:IDCBY)

1.16%

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Country Allocation

Weighting

Taiwan

17.91%

China

15.51%

Brazil

9.77%

Russia

8.62%

South Korea

8.04%

Hong Kong

7.15%

Thailand

5.49%

South Africa

5.34%

Malaysia

4.60%

Indonesia

3.88%

Click to enlarge

Now let's get to how DVEM stacks up against its peers in the emerging market ETF space.

ETF

Total Assets

Expense Ratio

Yield

Number of Holdings

DVEM

2.71 million

0.32%

3.00%

612

Vanguard FTSE Emerging Markets ETF-VWO

42.45 billion

0.15%

3.13%

3.973

iShares MSCI Emerging Markets ETF-EEM

31.11 Billion

0.69%

2.06%

839

iShares Core MSCI Emergin Markets ETF-IEMG

16.13 Billion

0.16%

2.49%

1,934

iShares Edge MSCI Min Vol Emerging Markets ETF-EEMV

4.42 billion

0.25%

2.71%

253

Schwab Emergin markets Equity ETF-SCHE

1.99 billion

0.14%

2.02%

708

WisdomTree Emerging Markets High Dividend ETF-DEM

1.59 billion

0.63%

4.90%

284

WisdomTree Emerging Markets Small Cap Dividend ETF-DGS

987.71 million

0.63%

3.14%

491

Schwab Fundamental Emerging Markets Large Company Index-FNDE

627.26 million

0.47%

1.63%

275

PowerShares FTSE RAFI Emerging Markets Portfolio-PXH

534.05 million

0.49%

3.27%

335

SPDR S&P Emerging Markets Dividend ETF-EDIV

299.94 million

0.49%

5.61%

102

iShares Emerging Markets Dividend ETF-DVYE

255.33 million

0.49%

4.83%

100

SPDR S&P Emerging Markets ETF-GMM

215 million

0.59%

2.33%

1,205

Click to enlarge

As usual, I look at the expense ratio first and start from the lowest in order to find the best ETF choice. We can scrape away the highest expense ETFs right away, which would leave only four (including the new WisdomTree fund). These are DVEM, VWO, IEMG, and SCHE. There could be a case for looking past the higher expenses if the yield is higher such as DEM or EDIV. Personally, I don't think the yield is high enough in these cases for the high expense ratio to be ignored. Essentially, the expense ratio tells you how efficiently an ETF itself is run. Any passive ETF should ideally have extremely low expenses. WisdomTree deserves a little credit for not letting the expenses get out of hand when compared to the others that are 50 basis points or higher, but at the same time DVEM's ER of 0.35 makes it hard to compete with the other three established funds in this space.

Conclusion

So when it comes to choosing from the remaining funds, I think that VWO provides the best solution for investors seeking dividend income from emerging markets companies. While I respect the variety of ETFs that WisdomTree offers and the contributions they have made to the ETF marketplace in general, Vanguard lives up to the standard it has set with its emerging market ETF.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.