When studying Brazilian equities, you quickly notice a historical trend: they offer exceptionally high dividend yields. In this article, we will break down exactly why this happens.
The Dividend Data
The dividend yields for the two main ETFs tracking the Brazilian market—the iShares MSCI Brazil ETF (EWZ) and the Franklin FTSE Brazil ETF (FLBR)—have varied from 6% to 14% since 2018. Over the last year (2025), EWZ yielded around 6%, while FLBR reached 8%.
| Year | SPDR Dow Jones | iShares MSCI Emerging Markets | iShares MSCI Brazil | Franklin FTSE Brazil | SPDR S&P 500 | VT Total World Stock |
|---|---|---|---|---|---|---|
| 2017 | 2.66% | 2.57% | 2.95% | 0.75% | 2.25% | 2.76% |
| 2018 | 2.42% | 2.34% | 4.53% | 6.16% | 2.10% | 2.65% |
| 2019 | 2.56% | 3.44% | 4.35% | 6.13% | 2.14% | 2.90% |
| 2020 | 2.36% | 2.00% | 2.98% | 4.23% | 1.92% | 2.21% |
| 2021 | 1.83% | 2.07% | 11.71% | 10.86% | 1.43% | 2.11% |
| 2022 | 2.06% | 2.52% | 14.85% | 14.75% | 1.63% | 2.24% |
| 2023 | 2.09% | 2.88% | 7.71% | 12.30% | 1.61% | 2.40% |
| 2024 | 1.74% | 2.51% | 7.54% | 6.84% | 1.33% | 2.10% |
| 2025 | 1.57% | 2.56% | 6.11% | 8.95% | 1.19% | 2.04% |
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Sector Diversification
There is a major difference in sector weightings when you compare EWZ and FLBR to US indices. The Brazilian market is dominated by Financials, Energy, Materials, and Utilities, which make up almost 60% of both ETFs. These are historically mature sectors known for larger dividend payouts.
When compared to broader indices like the iShares MSCI Emerging Markets ETF (EEM), the S&P 500 (SPY), and the Dow Jones Industrial Average (DIA), Brazilian indices feature far more mature commodity and financial businesses, while tech and growth companies represent a much smaller portion of the index.
| Sector | EWZ (Brazil) | FLBR (Brazil) | EEM (Emerging Mkts) | S&P 500 (SPY) | Dow Jones (DIA) |
|---|---|---|---|---|---|
| Financials | 35.18% | 29.10% | 22.50% | 11.42% | 27.43% |
| Information Technology | 0.70% | 0.68% | 24.20% | 38.66% | 19.65% |
| Energy | 16.45% | 17.85% | 5.30% | 3.26% | 2.25% |
| Materials | 14.95% | 16.20% | 7.20% | 1.85% | 3.52% |
| Utilities | 12.84% | 14.60% | 2.60% | 2.09% | 0.00% |
| Industrials | 8.35% | 8.08% | 5.80% | 8.43% | 18.19% |
| Consumer Staples | 5.83% | 5.56% | 5.60% | 4.51% | 3.99% |
| Consumer Discretionary | 2.38% | 3.60% | 12.40% | 9.35% | 10.66% |
| Communication Services | 2.05% | 1.80% | 8.80% | 10.19% | 1.79% |
| Health Care | 1.19% | 1.70% | 4.10% | 8.43% | 12.54% |
| Real Estate | 0.77% | 0.82% | 1.50% | 1.82% | 0.00% |
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The State Needs Dividends: State-Owned Companies Payout
When looking at the Ibovespa (the benchmark index for Brazilian equities), roughly 20% of it consists of companies with state participation. This share is heavily driven by Petrobras (NYSE: PBR / PBR.A | B3: PETR3 / PETR4), a state-owned giant that alone makes up 12% of the index. Petrobras is often used by government administrations to improve the federal budget through massive dividend distributions.
For example, following the Ukraine-Russia war and the subsequent spike in oil prices, Petrobras became the second-largest dividend payer in the world—ahead of companies like Microsoft (MSFT), Apple (AAPL), and ExxonMobil (XOM). By distributing US$21.7 billion and reaching a 30% dividend yield, it anchored the high-yield profile of the entire Brazilian market, aided by a discounted valuation.
Top 4 State-Owned or Partially State-Owned Companies:
- Petrobras (NYSE: PBR | B3: PETR4): ~11.5% to 12%. The stock with the largest state-owned weight, frequently competing for the top spot in the broader index alongside Vale (NYSE: VALE) and Itaú Unibanco (NYSE: ITUB).
- Sabesp (NYSE: SBS | B3: SBSP3): ~3% to 3.5%. Its weight in the index increased significantly following its recent privatization process and the influx of private capital.
- Banco do Brasil (OTC: BDORY | B3: BBAS3): ~2.5% to 3%. Despite its massive profits, its index weight is somewhat constrained because the government retains over 50% of the shares. This limits the amount of stock actively available for public trading (the free float).
- Eletrobras (NYSE: EBR | B3: ELET3): ~1.5% to 2%. Its control was recently privatized, but the Brazilian state still retains a significant stake of roughly 43% in the company.
High Interest Rates Incentivize High Dividends
A recurring topic in recent Brazilian finance coverage—explored extensively in articles like High Interest Rates Anchor Brazilian Venture Capital Amid US AI Surge and High Interest Rates and Election Outlook to Dictate Brazil’s Markets—is how deeply macroeconomic policies impact corporate capital allocation.
Over the last five years, Brazil’s baseline interest rate (the SELIC) has consistently hovered well above 10% annually. Under these conditions, the mature companies that make up most of the Brazilian indices struggle to find internal investments or projects that can surpass a 10% risk-free return with a favorable risk-to-reward ratio. In this scenario, it makes more financial sense for companies to distribute their excess profits directly to shareholders as dividends.
Stock Buyback Programs Are Less Popular
Another common method of returning value to shareholders in the US is through stock buybacks. However, buybacks are far less popular in Brazil for a few reasons:
- Governance Risks: If a company has state ownership, executing buybacks reduces the public float and inadvertently increases the state’s proportional control over the company, bringing governance risks.
- Valuation Impacts: Because high interest rates inherently compress equity valuations, buyback programs often don’t look as attractive to management. Instead, companies default to generating high dividend yields, continuing the cycle of paying out excess profits directly as cash.
What Stands Out: Newly US-Listed Brazilian Stocks
As mentioned in our Guide for EWZ and Guide for FLBR, the traditional landscape of the Brazilian stock market is shifting. This is largely due to the inclusion of Brazilian companies listed directly on US exchanges into the EWZ index.
These inclusions introduce a more US-style mix of fintech, software, e-commerce, and health-tech companies that do not follow the traditional brazilian high-dividend trend. Despite these growth companies making up roughly 15% of EWZ, they have already dragged down the ETF’s aggregate dividend yield. In 2025, there was a 2% gap between the ETFs: FLBR (which strictly tracks locally listed stocks) yielded 8%, while EWZ yielded 6%.
For instance, Nu Holdings (NYSE: NU)—a fintech giant that often disputes the title of highest market cap in Brazil alongside Petrobras and Itaú—does not distribute dividends. Instead, it focuses on reinvesting its profits into international expansion and share buybacks.
Summary
ETFs like EWZ and FLBR, along with Brazilian stocks in general, offer high dividend yields due to a perfect storm of factors. The indices are heavily composed of mature companies in inherently high-yielding sectors (commodities, financials, and utilities). Furthermore, Brazil’s persistently high interest rates—sitting above 10% annually for most of the last five years—heavily incentivize companies to distribute their profits as cash rather than reinvesting internally or executing stock buybacks.
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