Look for Dividends in Emerging Markets

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July 7, 2011 1:14pm NYSE:DEM

Seeking out dividend payers can help investors tap emerging-markets growth while providing a downside risk cushion, according to WisdomTree CEO Jonathan Steinberg. Steinberg talks a little bit about the WisdomTree fund, WisdomTree Emerging Markets Equity Inc (NYSE:DEM), and gives us a little highlight on strategy there and

really what was the genesis of that fund.

Steinberg says, “DEM is emerging-markets equity income, and it uses our dividend-weighted approach. So when you weight internationally by dividends, you end up with very different country weights, and it gives you sort of a relative-value bias versus some of the momentum strategies, which is really what marks the cap-weighted approaches. So we can end up with very different investing experiences.

Our fund is about 3.5 years old. From a performance standpoint, it’s maybe 700 basis points or 800 basis points of annualized outperformance over the MSCI index. Mostly that comes from the different country weights, and the very high yields protects on the downside. So, in fact, in the emerging markets, dividends have been growing in general at a much faster rate than anywhere else on the planet, and so not only are you getting high yields but the dividends themselves are growing. So it has a very, very complementary compounding effect to your overall returns. So it’s just been something that’s worked very well, and it’s just another way to get growth of dividends and to just diversify your overall emerging-markets experience.”

See the full “Morningstar” video below:

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