Back to top

Image: Bigstock

Is WisdomTree Japan SmallCap Dividend ETF (DFJ) a Strong ETF Right Now?

Read MoreHide Full Article

Making its debut on 06/16/2006, smart beta exchange traded fund WisdomTree Japan SmallCap Dividend ETF (DFJ - Free Report) provides investors broad exposure to the Asia-Pacific (Developed) ETFs category of the market.

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.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

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.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $251.28 million, this makes it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. DFJ is managed by Wisdomtree. DFJ, before fees and expenses, seeks to match the performance of the WisdomTree Japan SmallCap Dividend Index.

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

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 one of the more expensive products in the space.

It's 12-month trailing dividend yield comes in at 2.56%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Haseko Corp accounts for about 1.50% of the fund's total assets, followed by Mitsubishi Gas Chemical Co Inc and Matsui Securities Co Ltd.

DFJ's top 10 holdings account for about 7.81% of its total assets under management.

Performance and Risk

So far this year, DFJ has lost about -3.83%, and is up roughly 5.24% in the last one year (as of 09/17/2020). During this past 52-week period, the fund has traded between $49.20 and $75.84.

DFJ has a beta of 0.71 and standard deviation of 20.42% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 791 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 - Free Report) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ - Free Report) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $5.26 billion in assets, iShares MSCI Japan ETF has $10.13 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.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


WISDMTR-JP SC D (DFJ) - free report >>

ISHARS-JAPAN (EWJ) - free report >>

JPM-BBLD JAP (BBJP) - free report >>

Published in