$DEM – Wisdomtree’s High Yield Emerging Markets ETF is inexpensive Quality

With a 7.5% dividend yield through June 6th 2023, the WisdomTree Emerging Markets High Dividend Fund ($DEM) presents the opportunity to own a diversified basket of high yield equities backstopped by thoughtful attention to the return-enhancing Quality factor. On the basis of current dividend yield, the fund ranks 3rd  behind only the iShares’ Emerging Markets Dividend ($DYVE), Latin America 40 ($ILF) and MSCI Brazil ($EWZ) ETFs. 1 These high-yielding funds don’t include an explicit filter for the quality factor; we consider the quality factor particularly beneficial when investing in the sometimes-opaque universe of Emerging Market equities.

To a certain extent, high quality, high yield equities underwrite their own returns. Even with stagnant margins and revenues, a 7.5% real return is impressive. 2

Historical Outperformance

When removing the Mkt-RF to x-ray excess returns we get a positive alpha. 3 This is net of the sizable 63bps management fee. See Table 1 for the details.

Table 1: $DEM Summary Stats from Aug-2007 through June-2023
 $DEM$VWO Benchmark
Return in Excess of the Risk free Rate2.18%0.96%
Sharpe Ratio0.110.04
Alpha vs Benchmark ($VWO)1.31%N/A

Figure 1 highlights the outperformance of $DEM versus the $VWO benchmark since inception. 

Significantly Undervalued with High Yield

Figure 2 shows the current Price / Dividend ratio (inverse of Yield) as historically cheap. At just 62% of its historical median valuation on a Price / Dividend basis, DEM is setup for meaningful appreciation through reversion to its mean valuation. The same applies to Emerging Markets more broadly. 

Since inception, $DEM Price / Dividend ratio has contracted over 5% per year. At the same time the dividend yield has continued to grow at a 3.5% annualized rate. High yield does not come at the expense of stagnant dividend growth.


The WisdomTree Emerging Markets High Dividend Fund is cheaper than at any other point in its history, with a category-leading 7.5% yield and a growing dividend. It also screens for Quality, a well-known return-enhancing factor. The 63bps fee is on the high side, but performance well exceeded the cap-weighted benchmark net of this fee. If you can see past some of the country risk overshadowing Emerging Markets, in particular China, $DEM is an attractive choice for the EM sleeve of an equity-based ETF portfolio.

Figure 1
Figure 2
  1. Among the full universe of broad-based non-specialty US-listed long-only equity ETFs, excluding funds with less than $250M AUM, 5Y or less performance history, REITs, and MLPs
  2. Assuming revenues keep up with inflation, which is more or less certain by definition over any meaningful time horizon.
  3. with a t-stat of 0.74, below the typical threshold of significance

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