Launched on 06/16/2006, the WisdomTree Japan SmallCap Dividend ETF (DFJ Quick QuoteDFJ - Free Report) is a smart beta exchange traded fund offering 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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.

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 sponsored by Wisdomtree. It has amassed assets over $240.31 million, making it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. DFJ, before fees and expenses, seeks to match the performance of the WisdomTree Japan SmallCap Dividend Index.

The WisdomTree Japan SmallCap Dividend Index is comprised of dividend-paying small capitalization companies in Japan.

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 2.38%.

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.

When you look at individual holdings, Toyo Tire Co accounts for about 0.62% of the fund's total assets, followed by Amano Corp and Matsui Securities Co Ltd.

DFJ's top 10 holdings account for about 5.1% of its total assets under management.

Performance and Risk

Year-to-date, the WisdomTree Japan SmallCap Dividend ETF return is roughly 3.21% so far, and was up about 7.27% over the last 12 months (as of 02/18/2025). DFJ has traded between $70.98 and $81.42 in this past 52-week period.

DFJ has a beta of 0.49 and standard deviation of 15.50% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 777 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 Quick QuoteBBJP - Free Report) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ Quick QuoteEWJ - Free Report) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $11.70 billion in assets, iShares MSCI Japan ETF has $13.85 billion. BBJP has an expense ratio of 0.19% and EWJ charges 0.50%.

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.