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Is First Trust STOXX European Select Dividend ETF (FDD) a Strong ETF Right Now?
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Launched on 08/27/2007, the First Trust STOXX European Select Dividend ETF (FDD - Free Report) is a smart beta exchange traded fund offering 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
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
Managed by First Trust Advisors, FDD has amassed assets over $209.66 million, making it one of the average sized ETFs in the European Equity ETFs. This particular fund, before fees and expenses, 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
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 1.58%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Aegon N.v. (AGN.NA) accounts for about 6.41% of the fund's total assets, followed by Standard Life Aberdeen Plc (SLA.LN) and Royal Dutch Shell Plc (class B) (RDSB.LN).
Its top 10 holdings account for approximately 45.88% of FDD's total assets under management.
Performance and Risk
The ETF has lost about -22.01% so far this year and is down about -11.33% in the last one year (as of 06/24/2020). In the past 52-week period, it has traded between $8.41 and $14.36.
The fund has a beta of 0.84 and standard deviation of 23.30% 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 - 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 $5.02 billion in assets, Vanguard FTSE Europe ETF has $11.32 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?
Launched on 08/27/2007, the First Trust STOXX European Select Dividend ETF (FDD - Free Report) is a smart beta exchange traded fund offering 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
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
Managed by First Trust Advisors, FDD has amassed assets over $209.66 million, making it one of the average sized ETFs in the European Equity ETFs. This particular fund, before fees and expenses, 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
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 1.58%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Aegon N.v. (AGN.NA) accounts for about 6.41% of the fund's total assets, followed by Standard Life Aberdeen Plc (SLA.LN) and Royal Dutch Shell Plc (class B) (RDSB.LN).
Its top 10 holdings account for approximately 45.88% of FDD's total assets under management.
Performance and Risk
The ETF has lost about -22.01% so far this year and is down about -11.33% in the last one year (as of 06/24/2020). In the past 52-week period, it has traded between $8.41 and $14.36.
The fund has a beta of 0.84 and standard deviation of 23.30% 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 - 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 $5.02 billion in assets, Vanguard FTSE Europe ETF has $11.32 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.