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Is First Trust STOXX European Select Dividend ETF (FDD) a Strong ETF Right Now?
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Designed to provide broad exposure to the European Equity ETFs category of the market, the First Trust STOXX European Select Dividend ETF (FDD - Free Report) is a smart beta exchange traded fund launched on 08/27/2007.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of 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
The fund is managed by First Trust Advisors. FDD has been able to amass assets over $201.43 million, making it one of the average sized ETFs in the European Equity ETFs. FDD 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
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 has a 12-month trailing dividend yield of 6%.
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, Aegon N.v. (AGN.NA) accounts for about 5.89% of total assets, followed by Royal Dutch Shell Plc (class B) (RDSB.LN) and Standard Life Aberdeen Plc (SLA.LN).
The top 10 holdings account for about 44.91% of total assets under management.
Performance and Risk
Year-to-date, the First Trust STOXX European Select Dividend ETF has lost about -33.12% so far, and is down about -24.18% over the last 12 months (as of 06/02/2020). FDD has traded between $8.41 and $14.36 in this past 52-week period.
The fund has a beta of 0.84 and standard deviation of 22.24% 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.
IShares MSCI Eurozone ETF (EZU - Free Report) tracks MSCI EMU Index and the Vanguard FTSE Europe ETF (VGK - Free Report) tracks FTSE Developed Europe All Cap Index. IShares MSCI Eurozone ETF has $3.47 billion in assets, Vanguard FTSE Europe ETF has $11.33 billion. EZU has an expense ratio of 0.49% 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?
Designed to provide broad exposure to the European Equity ETFs category of the market, the First Trust STOXX European Select Dividend ETF (FDD - Free Report) is a smart beta exchange traded fund launched on 08/27/2007.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of 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
The fund is managed by First Trust Advisors. FDD has been able to amass assets over $201.43 million, making it one of the average sized ETFs in the European Equity ETFs. FDD 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
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 has a 12-month trailing dividend yield of 6%.
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, Aegon N.v. (AGN.NA) accounts for about 5.89% of total assets, followed by Royal Dutch Shell Plc (class B) (RDSB.LN) and Standard Life Aberdeen Plc (SLA.LN).
The top 10 holdings account for about 44.91% of total assets under management.
Performance and Risk
Year-to-date, the First Trust STOXX European Select Dividend ETF has lost about -33.12% so far, and is down about -24.18% over the last 12 months (as of 06/02/2020). FDD has traded between $8.41 and $14.36 in this past 52-week period.
The fund has a beta of 0.84 and standard deviation of 22.24% 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.
IShares MSCI Eurozone ETF (EZU - Free Report) tracks MSCI EMU Index and the Vanguard FTSE Europe ETF (VGK - Free Report) tracks FTSE Developed Europe All Cap Index. IShares MSCI Eurozone ETF has $3.47 billion in assets, Vanguard FTSE Europe ETF has $11.33 billion. EZU has an expense ratio of 0.49% 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.