Is First Trust STOXX European Select Dividend Index Fund (FDD) a Strong ETF Right Now?
Launched on 08/27/2007, the First Trust STOXX European Select Dividend Index Fund (FDD) is a smart beta exchange traded fund offering broad exposure to the European Equity 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.
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.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by First Trust Advisors. FDD has been able to amass assets over $314.97 M, making it one of the larger ETFs in the European Equity ETFs. This particular fund, before fees and expenses, 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
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 0.57% for this ETF, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 4.81%.
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.
Taking into account individual holdings, Intesa Sanpaolo Spa (ISP.IM) accounts for about 4.98% of the fund's total assets, followed by Sse Plc (SSE.LN) and Royal Dutch Shell Plc (class B) (RDSB.LN).
Its top 10 holdings account for approximately 41.64% of FDD's total assets under management.
Performance and Risk
Year-to-date, the First Trust STOXX European Select Dividend Index Fund return is roughly 6.67% so far, and is down about -5.98% over the last 12 months (as of 05/27/2019). FDD has traded between $11.69 and $14 in this past 52-week period.
The ETF has a beta of 0.72 and standard deviation of 13.84% for the trailing three-year period, making it a medium risk choice in the space. With about 30 holdings, it has more concentrated exposure than peers.
First Trust STOXX European Select Dividend Index Fund is not a suitable option for investors seeking to outperform the European Equity ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares MSCI Eurozone ETF (EZU) tracks MSCI EMU Index and the Vanguard FTSE Europe ETF (VGK) tracks FTSE Developed Europe All Cap Index. IShares MSCI Eurozone ETF has $6.74 B in assets, Vanguard FTSE Europe ETF has $13.47 B. EZU has an expense ratio of 0.47% and VGK charges 0.09%.
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.
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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First Trust STOXX European Select Dividend Index Fund (FDD): ETF Research Reports
iShares MSCI Eurozone ETF (EZU): ETF Research Reports
Vanguard FTSE Europe ETF (VGK): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.