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Is SPDR S&P Emerging Markets Dividend ETF (EDIV) a Strong ETF Right Now?

Designed to provide broad exposure to the Broad Emerging Market ETFs category of the market, the SPDR S&P Emerging Markets Dividend ETF (EDIV) is a smart beta exchange traded fund launched on 02/23/2011.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is sponsored by State Street Global Advisors. It has amassed assets over $321.84 million, making it one of the average sized ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P Emerging Markets Dividend Opportunities Index.

This Index generally includes 100 tradable, exchange-listed common stocks from emerging market countries that offer high dividend yields. Additionally, stocks must have positive 3-year earnings growth and profitability. Stocks are weighted by annual dividend yield. To ensure diverse exposure, no single country or sector has more than a 25% weight and no single stock has more than a 3% weight.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.49%.

The fund has a 12-month trailing dividend yield of 2.98%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Formosa Plastics Corporation (1301-TW) accounts for about 3.35% of the fund's total assets, followed by Fomento Economico Mexicano Sab De Cv Sponsored Adr Class B (FMX) and Lenovo Group Limited (992-HK).

EDIV's top 10 holdings account for about 27.48% of its total assets under management.

Performance and Risk

Year-to-date, the SPDR S&P Emerging Markets Dividend ETF has gained about 7.81% so far, and is up about 35.19% over the last 12 months (as of 03/29/2021). EDIV has traded between $21.53 and $30.15 in this past 52-week period.

EDIV has a beta of 0.82 and standard deviation of 22.89% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 128 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR S&P Emerging Markets Dividend ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index and the iShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index. Vanguard FTSE Emerging Markets ETF has $75.83 billion in assets, iShares Core MSCI Emerging Markets ETF has $78.44 billion. VWO has an expense ratio of 0.10% and IEMG charges 0.11%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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Fomento Economico Mexicano S.A.B. de C.V. (FMX): Free Stock Analysis Report
 
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
 
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