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?
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.
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.
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
The fund is managed by First Trust Advisors. FDD has been able to amass assets over $307.53 M, making it one of the larger ETFs in the European Equity ETFs. FDD seeks to match the performance of the STOXX Europe Select Dividend 30 Index before fees and expenses.
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 FDD, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 4.91%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Sse Plc (SSE.LN) accounts for about 5.92% of the fund's total assets, followed by Intesa Sanpaolo Spa (ISP.IM) and Glaxosmithkline Plc (GSK.LN).
The top 10 holdings account for about 41.61% of total assets under management.
Performance and Risk
The ETF has added about 17.28% so far this year and is up about 13% in the last one year (as of 11/01/2019). In the past 52-week period, it has traded between $11.69 and $13.44.
FDD has a beta of 0.71 and standard deviation of 11.43% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 32 holdings, it has more concentrated exposure than peers.
First Trust STOXX European Select Dividend Index Fund 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.
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 $6.11 B in assets, Vanguard FTSE Europe ETF has $13.19 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
Vanguard FTSE Europe ETF (VGK): ETF Research Reports
iShares MSCI Eurozone ETF (EZU): ETF Research Reports
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