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

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The WisdomTree Japan SmallCap Dividend ETF (DFJ - Free Report) was launched on 06/16/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Asia-Pacific (Developed) ETFs category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

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.

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.

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 $238.36 million, making it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. DFJ seeks to match the performance of the WisdomTree Japan SmallCap Dividend Index before fees and expenses.

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.

With one of the more expensive products in the space, this ETF has annual operating expenses of 0.58%.

It has a 12-month trailing dividend yield of 2.48%.

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.

Looking at individual holdings, Haseko Corp accounts for about 1.30% of total assets, followed by Mitsubishi Gas Chemical Co Inc and Matsui Securities Co Ltd.

Its top 10 holdings account for approximately 7.36% of DFJ's total assets under management.

Performance and Risk

The ETF has lost about -9.85% and is up about 2.86% so far this year and in the past one year (as of 06/19/2020), respectively. DFJ has traded between $49.20 and $75.84 during this last 52-week period.

The ETF has a beta of 0.71 and standard deviation of 19.98% for the trailing three-year period, making it a medium risk choice in the space. With about 799 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 $4.48 billion in assets, iShares MSCI Japan ETF has $9.80 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.

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