There's a Case for Emerging Market Equities

The MSCI Emerging Markets Index is up 9.64% YTD, outperforming the S&P 500, potentially driving renewed interest in emerging market ETFs like the ALPS Emerging Sector Dividend Dogs ETF (EDOG), which boasts a 6.81% trailing 12-month dividend yield. EDOG's exposure to India and Latin America, coupled with a potentially weakening dollar and easing trade tensions, could provide further tailwinds, as J.P. Morgan Asset Management notes that emerging markets are currently under-owned and poised to benefit from rotation trades.

Analysis

The MSCI Emerging Markets Index has demonstrated robust year-to-date performance, registering a 9.64% increase and significantly outperforming the S&P 500, signaling a potential resurgence in investor interest towards developing economies. Within this context, the ALPS Emerging Sector Dividend Dogs ETF (EDOG) has also shown admirable performance in 2025, a noteworthy achievement given its substantial allocation to defensive sectors such as consumer staples and utilities, which contrasts with the growth-driven rally in broader emerging markets. A key attraction of EDOG is its substantial equity income, evidenced by a trailing 12-month dividend yield of 6.81%, markedly higher than typical emerging market benchmarks. Several factors could provide further tailwinds for EDOG: easing U.S. trade tensions, particularly benefiting countries like India (9.31% of EDOG's portfolio) and Latin American nations (collectively nearly a quarter of the fund), as noted by J.P. Morgan Asset Management. Additionally, a weakening U.S. dollar, historically a positive catalyst for emerging market assets, and the current under-owned status of the asset class (global AUM share down to 5% from 8% in 2017) suggest potential for significant rotation trades. J.P. Morgan Asset Management also highlights a leadership shift within emerging markets towards laggard regions like Korea and Latin America, which could further benefit EDOG's Latin American exposure.

Key Decisions for Investors

• Investors seeking income-oriented exposure to emerging markets, with a defensive tilt, may find the ALPS Emerging Sector Dividend Dogs ETF (EDOG) an attractive option given its 6.81% trailing dividend yield and current market outperformance.
• Monitor developments in U.S. trade policy and U.S. dollar movements, as easing tensions and continued dollar weakness could serve as significant positive catalysts for EDOG and the broader emerging markets asset class.
• Consider the under-owned nature of emerging markets and the potential for rotational shifts; allocating to ETFs like EDOG, with its specific exposure to India and Latin America, could capitalize on these trends.
• Evaluate EDOG's defensive sector composition as a potential diversifier, particularly if market leadership within emerging markets broadens beyond pure growth stocks or if volatility increases.