Is First Trust STOXX European Select Dividend ETF (FDD) a Strong ETF Right Now?
The First Trust STOXX European Select Dividend ETF (FDD) made its debut on 08/27/2007, and is a smart beta exchange traded fund that provides broad exposure to the European Equity ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $207.58 million, making it one of the average sized ETFs in the European Equity ETFs. This particular fund seeks to match the performance of the STOXX Europe Select Dividend 30 Index before fees and expenses.
The STOXX Europe Select Dividend 30 Index consists of 30 high dividend-yielding securities selected from the STOXX Europe 600 Index.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.58% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 3.47%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
When you look at individual holdings, Aegon N.v. (AGN.NA) accounts for about 6.38% of the fund's total assets, followed by Standard Life Aberdeen Plc (SLA.LN) and Legal & General Group Plc (LGEN.LN).
Its top 10 holdings account for approximately 46.88% of FDD's total assets under management.
Performance and Risk
So far this year, FDD has lost about -18.77%, and is down about -4.57% in the last one year (as of 08/07/2020). During this past 52-week period, the fund has traded between $8.41 and $14.36.
The fund has a beta of 0.84 and standard deviation of 23.79% for the trailing three-year period, which makes FDD a medium risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust STOXX European Select Dividend ETF is not a suitable option for investors seeking to outperform the European Equity ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
JPMorgan BetaBuilders Europe ETF (BBEU) tracks MORNINGSTAR DEV EUROPE TARGET MKT EXP ID and the Vanguard FTSE Europe ETF (VGK) tracks FTSE Developed Europe All Cap Index. JPMorgan BetaBuilders Europe ETF has $5.17 billion in assets, Vanguard FTSE Europe ETF has $11.81 billion. BBEU has an expense ratio of 0.09% and VGK charges 0.08%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the European Equity ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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First Trust STOXX European Select Dividend ETF (FDD): ETF Research Reports
Vanguard FTSE Europe ETF (VGK): ETF Research Reports
JPMorgan BetaBuilders Europe ETF (BBEU): ETF Research Reports
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