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Is First Trust STOXX European Select Dividend ETF (FDD) a Strong ETF Right Now?
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The First Trust STOXX European Select Dividend ETF (FDD - Free Report) 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $287.16 million, making it one of the average sized ETFs in the European Equity ETFs. Before fees and expenses, this particular fund seeks to match the performance of the STOXX Europe Select Dividend 30 Index.
The STOXX Europe Select Dividend 30 Index consists of 30 high dividend-yielding securities selected from the STOXX Europe 600 Index.
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.
Operating expenses on an annual basis are 0.57% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3.70%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Glaxosmithkline Plc (GSK.LN) accounts for about 6.17% of the fund's total assets, followed by Sse Plc (SSE.LN) and Legal & General Group Plc (LGEN.LN).
Its top 10 holdings account for approximately 45.1% of FDD's total assets under management.
Performance and Risk
So far this year, FDD return is roughly 10.61%, and is up about 31.65% in the last one year (as of 10/13/2021). During this past 52-week period, the fund has traded between $9.81 and $15.54.
FDD has a beta of 1 and standard deviation of 25.54% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust STOXX European Select Dividend ETF is a reasonable option for investors seeking to outperform the European Equity ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
JPMorgan BetaBuilders Europe ETF (BBEU - Free Report) tracks MORNINGSTAR DEV EUROPE TARGET MKT EXP ID and the Vanguard FTSE Europe ETF (VGK - Free Report) tracks FTSE Developed Europe All Cap Index. JPMorgan BetaBuilders Europe ETF has $8.69 billion in assets, Vanguard FTSE Europe ETF has $20.27 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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Is First Trust STOXX European Select Dividend ETF (FDD) a Strong ETF Right Now?
The First Trust STOXX European Select Dividend ETF (FDD - Free Report) 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $287.16 million, making it one of the average sized ETFs in the European Equity ETFs. Before fees and expenses, this particular fund seeks to match the performance of the STOXX Europe Select Dividend 30 Index.
The STOXX Europe Select Dividend 30 Index consists of 30 high dividend-yielding securities selected from the STOXX Europe 600 Index.
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.
Operating expenses on an annual basis are 0.57% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3.70%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Glaxosmithkline Plc (GSK.LN) accounts for about 6.17% of the fund's total assets, followed by Sse Plc (SSE.LN) and Legal & General Group Plc (LGEN.LN).
Its top 10 holdings account for approximately 45.1% of FDD's total assets under management.
Performance and Risk
So far this year, FDD return is roughly 10.61%, and is up about 31.65% in the last one year (as of 10/13/2021). During this past 52-week period, the fund has traded between $9.81 and $15.54.
FDD has a beta of 1 and standard deviation of 25.54% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust STOXX European Select Dividend ETF is a reasonable option for investors seeking to outperform the European Equity ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
JPMorgan BetaBuilders Europe ETF (BBEU - Free Report) tracks MORNINGSTAR DEV EUROPE TARGET MKT EXP ID and the Vanguard FTSE Europe ETF (VGK - Free Report) tracks FTSE Developed Europe All Cap Index. JPMorgan BetaBuilders Europe ETF has $8.69 billion in assets, Vanguard FTSE Europe ETF has $20.27 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.