What if half the return story in emerging markets isn’t being fully recognized?
Reframing emerging markets through a total return lens, with growing emphasis on income alongside capital appreciation.
Emerging markets (EMs) are often viewed primarily as a source of long-term growth. While this remains true, it overlooks an important part of the return profile: income.
Over time, EMs have evolved into a more balanced asset class, where dividends play a significant role alongside capital appreciation.
A shift in dividend culture
One of the clearest structural changes in emerging markets is the rise in dividend-paying companies.
More than 90% of companies in the MSCI Emerging Markets Index now pay a dividend (Chart 1) – higher than in developed markets (DMs). This marks a meaningful shift over the past two decades, supported by stronger cash flows and more disciplined capital allocation.
Chart 1. % of emerging market companies paying dividends (25-year trend)
Income as a key driver of returns
Dividends have contributed significantly to long-term returns in EMs (Chart 2).
Chart 2. Composition of total return (%)
Chart 3. Dividend index growth emerging markets vs. developed markets
Strong corporate fundamentals
The income story is supported by a solid corporate backdrop. Emerging market companies generally exhibit:
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