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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?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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
Because the fund has amassed over $287.84 million, this makes it one of the average sized ETFs in the European Equity ETFs. FDD is managed by First Trust Advisors. 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.
Annual operating expenses for FDD are 0.57%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 3.80%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Looking at individual holdings, Glaxosmithkline Plc (GSK.LN) accounts for about 6.17% of total assets, followed by Sse Plc (SSE.LN) and Legal & General Group Plc (LGEN.LN).
The top 10 holdings account for about 45.1% of total assets under management.
Performance and Risk
So far this year, FDD has added about 10.57%, and is up roughly 35.36% in the last one year (as of 09/21/2021). During this past 52-week period, the fund has traded between $9.81 and $15.54.
The fund has a beta of 0.99 and standard deviation of 25.52% 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 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 $8.72 billion in assets, Vanguard FTSE Europe ETF has $20.38 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?
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?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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
Because the fund has amassed over $287.84 million, this makes it one of the average sized ETFs in the European Equity ETFs. FDD is managed by First Trust Advisors. 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.
Annual operating expenses for FDD are 0.57%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 3.80%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Looking at individual holdings, Glaxosmithkline Plc (GSK.LN) accounts for about 6.17% of total assets, followed by Sse Plc (SSE.LN) and Legal & General Group Plc (LGEN.LN).
The top 10 holdings account for about 45.1% of total assets under management.
Performance and Risk
So far this year, FDD has added about 10.57%, and is up roughly 35.36% in the last one year (as of 09/21/2021). During this past 52-week period, the fund has traded between $9.81 and $15.54.
The fund has a beta of 0.99 and standard deviation of 25.52% 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 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 $8.72 billion in assets, Vanguard FTSE Europe ETF has $20.38 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.