Time to look for income in developing markets

ON EMS

Despite powerful macroeconomic and demographic reasons for increasing emerging market exposure, many investors remain cautious given the volatility the asset class has shown in the past.

One way of reducing the volatility associated with the asset class is to use a lower risk, income route. A dividend focus plays into the long-term secular story of emerging market companies becoming more shareholder friendly in the face of greater global scrutiny. Improving corporate governance has been accompanied by falling debt levels and steadier cashflows, creating a platform for sustainable dividend payments. A growing percentage of the total return generated by emerging market equities now comes from dividends – a trend that is expected to continue over the coming years. M...