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Is WisdomTree Emerging Markets High Dividend ETF (DEM) a Strong ETF Right Now?

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The WisdomTree Emerging Markets High Dividend ETF (DEM - Free Report) was launched on 07/13/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Broad Emerging Market ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Wisdomtree. It has amassed assets over $1.74 billion, making it one of the larger ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, seeks to match the performance of the WisdomTree Emerging Markets High Dividend Index.

The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of the highest dividend yielding stocks selected from the WisdomTree Emerging Markets Dividend Index.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.63% for this ETF, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 8.05%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Vale Sa (VALE3) accounts for about 9.51% of the fund's total assets, followed by Petroleo Brasileiro Sa (PETR3) and China Construction Bank Corp H.

Its top 10 holdings account for approximately 29.69% of DEM's total assets under management.

Performance and Risk

The ETF has lost about -15.67% so far this year and is down about -14.75% in the last one year (as of 07/25/2022). In the past 52-week period, it has traded between $34.91 and $47.47.

DEM has a beta of 0.79 and standard deviation of 22.69% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 492 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree Emerging Markets High 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.

IShares Core MSCI Emerging Markets ETF (IEMG - Free Report) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO - Free Report) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $64.55 billion in assets, Vanguard FTSE Emerging Markets ETF has $69.83 billion. IEMG has an expense ratio of 0.09% and VWO charges 0.08%.

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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