Beyond BRICS: the road less travelled 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 travelled’ stretches from the Middle East and South-East Asia to Central Asia and Latin America, offering diversification opportunities for those willing to look further afield. 

Why EM matters for equity income

A common thread across EM 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 EM than in developed markets [1]. 

Meanwhile, from 2003 to 2024, the dividend compound annual growth rate (CAGR) in emerging markets was 11.8%, compared with 7.4% in developed markets (see Chart 1).

Source: Factset, Jefferies Equity Research, 30 June 2025. Note: Dividend index is bottom-up aggregated with free float adjustment in a YoY like-to-like basis for the current MSCI universe. For illustrative purposes only. Forecast is offered as opinion and is not reflective of potential performance. Forecast is not guaranteed, and actual events or results may differ materially.

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

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

The new frontier: Middle East

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

Countries such as Saudi Arabia and the United Arab Emirates (UAE) are no longer defined solely by oil. They are now centres 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. 

Social reforms - such as increased female workforce participation and liberalisation of entertainment - are creating new consumption classes and driving demand for private education, leisure and travel.

For equity income investors, 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 IPOs (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.

South-East Asia: growth, digitalisation 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 digitalisation 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, Georgia - located at the strategic crossroads of Eastern Europe and Western Asia - is also making waves. We’ve identified a bank there which boasts 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, selectively investing in these companies may provide valuable diversification advantages for investors.   

Latin America: beyond Brazil and tariffs

Smaller Latin American markets are often overshadowed by larger neighbours. Yet these countries are undergoing a renaissance driven by commodity demand, digitalisation and infrastructure investment.

For example, Peru is benefiting from rising copper prices, which are boosting government revenues and spurring private sector investment.

We see 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's tariffs but that ignores important nuances. The US’ southern neighbour is also home to two airport operators that exemplify the market’s income potential.

With captive customer bases and strong pricing power, the duo is well placed to benefit from growth in air travel,  a sector still underpenetrated in Mexico. The country’s stable economy and healthy balance sheet further support attractive returns and income growth.

Navigating risks and unlocking opportunity

These markets come with their own challenges - notably liquidity constraints, governance issues and political risks.

However, active management and local presence are key. By engaging directly with company management, understanding local market dynamics and focusing on fundamentals, investors can identify ‘gems’ often missed by passive strategies.

As the global search for yield intensifies, the road less travelled in emerging markets offers a wealth of opportunities for equity income investors.

By looking beyond the BRICS and embracing the diversity of emerging markets, asset managers can build more resilient, diversified and rewarding portfolios—fit for an age of volatility and change.