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Emerging Global Advisors (EGA) has added another innovative dividend fund to its growing roster of emerging market ETFs with the launch of the EGShares EM Dividend High Income ETF (EMHD) on the NYSE Arca.
The fund, which is linked to an index co-developed by EGA and FTSE, provides exposure to emerging market companies which have consistently generated high income for their shareholders.
Marten Hoekstra, CEO of Emerging Global Advisors, said: “The rise of emerging market-based multinationals has greatly expanded the number of companies with the capacity to sustain high dividend payments. EMHD applies our firm’s emerging market expertise to create a high income solution that can provide investors with a global approach to diversifying income streams.”
The fund’s underling index is the FTSE Equal Weighted Emerging All Cap ex Taiwan Diversified Dividend Yield 50 Index. This index measures the performance of the 50 highest yielding, liquid emerging market equity securities in the FTSE Emerging All Cap ex Taiwan Universe, excluding the least capitalised dividend-paying companies. The index is equally weighted, meaning each constituent is allocated 2% as at rebalance dates.
The index incorporates a number of dividend coverage and consistency screens to ensure that constituent companies have both a willingness and ability to pay dividends. These include requirements that constituents have paid dividends in each of the last three years, that the trailing one-year dividend yield is less than 20%, and that the dividend payout ratio is below 100%.
Despite these screens the index still manages to achieve a hefty dividend yield – currently more than 8% – which is well above comparable indices such as the S&P EM Dividend Opportunities Index, the Dow Jones EM Select Dividend Index, the WisdomTree EM Equity Income Index and the MSCI EM High Dividend Yield Index.
The index is naturally well diversified owing to its equal weight approach; however, additional diversification is accomplished by limiting the number of stocks per industry and country to 10.
The fund has an expense ratio of 0.85% and pay dividends monthly.