Back to top

Image: Bigstock

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

Read MoreHide Full Article

The WisdomTree Japan SmallCap Dividend ETF (DFJ - Free Report) made its debut on 06/16/2006, and is a smart beta exchange traded fund that provides broad exposure to the Asia-Pacific (Developed) 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.

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 Wisdomtree, DFJ has amassed assets over $249.25 million, making it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. Before fees and expenses, this particular fund 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

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things 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 2.46%.

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.

Taking into account 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.

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

Performance and Risk

The ETF has lost about -3.30% and was up about 5.28% so far this year and in the past one year (as of 10/09/2020), respectively. DFJ has traded between $49.20 and $75.84 during this last 52-week period.

The fund has a beta of 0.67 and standard deviation of 20.48% for the trailing three-year period, which makes DFJ a medium risk choice in this particular 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 $5.38 billion in assets, iShares MSCI Japan ETF has $10.18 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