DEM’s Dividend Yield Is at Global Financial Crisis Levels

I’ll just get right to it: in the history of our dataset, we have no record of the WisdomTree Emerging Markets High Dividend Fund (DEM) offering a dividend yield as large as what it has been posting in recent months. It’s showing a backward-looking 10.6% yield in our Digital Portfolio Developer tool.

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Meantime, using the trailing yield, we have no record of it having this large of a gap relative to the MSCI Emerging Markets Index, nor do we have any precedent for it being this much higher than the yield on the S&P 500.

In figure 1, I put the yellow circles on DEM's previous record high yield, around 10%, which came in October 2008. Recall that Lehman Brothers collapsed in the prior month.

Figure 1: DEM’s Dividend Yield

The thing about the 10.6% trailing yield is it captures some anomalies in the Energy patch, the best example being a 59% dividend yield on Petrobras, which comprises 3.4% of DEM. We found that the median analyst estimated yield on that firm is 15%.

DEM Needs the Dollar to Behave

For DEM and other emerging equity funds to work out, we will need the greenback to abide. Though it wouldn’t be the first time a strong currency got stronger, USD is so expensive that doing so will be an uphill climb. Its real effective exchange rate (REER) revisited its 2001 peak a few months ago.

Figure 2 shows what happened after 2001.

The turn of the century marked a nice entry point for both emerging markets and value. It was precisely the wrong time to be heavy in the U.S. and/or biased toward growth stocks.

Figure 2: Emerging Markets Value Stocks Are Beating U.S. Growth Stocks Again

Things to Know about DEM

We recently surpassed $2 billion in this one, which you should treat as a classic deep-value fund. To call it a “hunt for yield” fund is appropriate. To be long DEM, you should agree with the thesis that has the market “on” dividends and “off” groups such as biotech and unprofitable story stocks. We believe DEM is for a classic value investor.

If you run DEM through the Digital Portfolio Developer Fund Comparison tool, type in MXEF for the MSCI Emerging Markets Index and “500” to bring up the S&P 500. That will let you replicate the first chart in this blog post while also presenting a deeper look at a ton of fundamental information.

Unless otherwise stated, all data as of 12/31/22.