Is WisdomTree Japan SmallCap Dividend ETF (DFJ) a Strong ETF Right Now?
Designed to provide broad exposure to the Asia-Pacific (Developed) ETFs category of the market, the WisdomTree Japan SmallCap Dividend ETF (DFJ) is a smart beta exchange traded fund launched on 06/16/2006.
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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
DFJ is managed by Wisdomtree, and this fund has amassed over $228.15 million, which makes it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. This particular fund seeks to match the performance of the WisdomTree Japan SmallCap Dividend Index before fees and expenses.
WisdomTree Japan SmallCap Dividend Index measures the performance of dividend-paying small capitalization companies in Japan. After the 300 largest companies have been removed from the WisdomTree Japan Dividend Index, the remaining companies are chosen for inclusion in the Index. Companies are weighted in the Index based on annual cash dividends paid.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.58%, making it one of the more expensive products in the space.
DFJ's 12-month trailing dividend yield is 2.81%.
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.
Looking at individual holdings, Haseko Corp accounts for about 1.46% of total assets, followed by Mitsubishi Gas Chemical Co Inc and Matsui Securities Co Ltd.
DFJ's top 10 holdings account for about 7.76% of its total assets under management.
Performance and Risk
So far this year, DFJ has lost about -12.44%, and is down about -2.19% in the last one year (as of 07/13/2020). During this past 52-week period, the fund has traded between $49.20 and $75.84.
The ETF has a beta of 0.71 and standard deviation of 20.07% for the trailing three-year period, making it a medium risk choice in the space. With about 797 holdings, it effectively diversifies company-specific risk.
Alternatives
WisdomTree Japan SmallCap Dividend ETF is a reasonable option for investors seeking to outperform the Asia-Pacific (Developed) ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
JPMorgan BetaBuilders Japan ETF (BBJP) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $4.86 billion in assets, iShares MSCI Japan ETF has $9.72 billion. BBJP has an expense ratio of 0.19% and EWJ charges 0.49%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Asia-Pacific (Developed) 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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WisdomTree Japan SmallCap Dividend ETF (DFJ): ETF Research Reports
iShares MSCI Japan ETF (EWJ): ETF Research Reports
JPMorgan BetaBuilders Japan ETF (BBJP): ETF Research Reports
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