Beyond BRICS: The road less traveled in emerging market equity income

Yet beyond the obvious lies a diverse and fast-evolving universe of smaller markets, many of which are quietly reshaping the landscape for equity income investing.

This road less traveled, stretching from the Middle East and Southeast Asia to Central Asia and Latin America (LatAm), has proven to make all the difference for investors – offering diversification opportunities for those willing to look further afield.

Why emerging markets matters for equity income

A common thread across EMs for more than two decades has been the rise of dividends and spread of shareholder-friendly corporate cultures.

According to FactSet and Jefferies data, the proportion of companies paying dividends is now higher in EMs than in developed markets.¹ Meanwhile, from 2003 to 2024, the dividend compound annual growth rate in EMs was 11.8%, compared with 7.4% in developed markets (Chart 1).

This trend is driven by improving corporate cash flows, stronger balance sheets and growing recognition of income’s importance to investors.

In many cases, EMs offer higher total yields than their developed counterparts – making them attractive for those seeking diversification and enhanced portfolio income.

Middle East

The new frontier

But let’s head down the road less traveled. Once considered peripheral in EM indices, the Middle East has grown from almost nothing a decade ago to a similar weight as LatAm in the benchmark.

Countries such as Saudi Arabia and the United Arab Emirates (UAE) are no longer defined solely by oil. They are now centers of economic diversification, social reform and corporate innovation.

Saudi Arabia is investing heavily in non-oil sectors including tourism, entertainment and technology, aiming to future-proof its economy against commodity price swings.² Social reforms, such as increased female workforce participation and liberalization of entertainment, are creating new consumption classes and driving demand for private education, leisure, and travel. For equity income investors, we believe this translates into a growing pool of well-managed companies with strong cash flows and progressive dividend policies.

Meanwhile, the UAE, with its openness to global talent and capital, is emerging as a regional hub for technology and infrastructure. The rise in initial public offerings, particularly in sectors such as district cooling and logistics, reflects policymakers’ commitment to sustainability and innovation. District cooling, for example, is a local temperature-regulation solution that reduces energy costs and carbon emissions, positioning companies for long-term growth and stable income streams.

Southeast Asia

Growth, digitalization, and income

Across the region, rising domestic demand, digital transformation and improving governance are driving a proliferation of dividend-paying companies – offering active managers more opportunities:

Indonesia’s banking and telecoms sectors, including companies that pay high dividends, benefit from digitalization and a growing middle class.

Vietnam’s rapid economic growth and market reforms are attracting investment, with companies adopting shareholder-friendly practices and regular shareholder payouts.

In the Philippines, infrastructure and logistics firms offer robust yields, supported by expanding trade and a young population.

Central Asia

The rise of the ‘-stan’ markets

Kazakhstan is home to one of the world’s largest uranium miners. As nuclear energy gains wider acceptance as a source of sustainable energy, the company’s low-cost production and supply chain advantages position it for long-term income growth.

Outside Central Asia, we believe Georgia, located at the strategic crossroads of Eastern Europe and Western Asia, is also making waves. One bank in the region has been identified as boasting robust risk systems and the latest technology platforms. This has enabled it to expand overseas to tap new markets and diversify revenues.

Firms located in these regions benefit from expanding trade and economic activity throughout Eurasia, a market that frequently operates independently from global trends. As a result, we believe selectively investing in these companies may provide valuable diversification advantages for investors.

Latin America

Beyond Brazil and tariffs

Smaller LatAm markets are often overshadowed by larger neighbors. Yet these countries are undergoing a renaissance driven by commodity demand, digitalization and infrastructure investment.

For example, Peru is benefiting from rising copper prices, which are boosting government revenues and spurring private sector investment. We foresee Peruvian financial services companies with a focus on risk management, as well as mobile payments platforms, gaining market share and reaching broader audiences.

Elsewhere, Mexico is often seen in the context of US tariffs but that ignores important nuances. The US’ southern neighbor is also home to two airport operators that exemplify the market’s income potential. With captive customer bases and strong pricing power, we believe the two airports are well placed to benefit from growth in air travel – a sector still underpenetrated in Mexico. We believe the country’s stable economy and healthy balance sheet further support attractive returns and income growth.

Endnotes

¹ Factset, Jefferies Equity Research, June 2025.
² "Saudi Arabia launches National Skills Platform to future-proof workforce." Arab News, April 2025. https://www.arabnews.com/node/2596987/business-economy.

Important information

Dividends are not guaranteed and a company’s future ability to pay dividends may be limited.

Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially.

Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.

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