Is WisdomTree Japan SmallCap Dividend Fund (DFJ) a Strong ETF Right Now?
The WisdomTree Japan SmallCap Dividend Fund (DFJ) 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?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $670.08 M, this makes it one of the larger ETFs in the Asia-Pacific (Developed) ETFs. DFJ is managed by Wisdomtree. Before fees and expenses, this particular fund seeks to match the performance of the WisdomTree Japan SmallCap Dividend Index.
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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining 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 1.77%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Sankyo Co Ltd accounts for about 0.81% of the fund's total assets, followed by Matsui Securities Co Ltd and Dic Corp.
DFJ's top 10 holdings account for about 6.01% of its total assets under management.
Performance and Risk
The ETF has added about 7.28% so far this year and is down about -10.83% in the last one year (as of 03/27/2019). In the past 52-week period, it has traded between $60.90 and $82.84.
The ETF has a beta of 0.69 and standard deviation of 13.75% for the trailing three-year period, making it a medium risk choice in the space. With about 813 holdings, it effectively diversifies company-specific risk.
WisdomTree Japan SmallCap Dividend Fund is an excellent option for investors seeking to outperform the Asia-Pacific (Developed) ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
JPMorgan BetaBuilders Japan ETF (BBJP) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $3.38 B in assets, iShares MSCI Japan ETF has $13.39 B. BBJP has an expense ratio of 0.19% and EWJ charges 0.47%.
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.
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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WisdomTree Japan SmallCap Dividend Fund (DFJ): ETF Research Reports
iShares MSCI Japan ETF (EWJ): ETF Research Reports
JPMorgan BetaBuilders Japan ETF (BBJP): ETF Research Reports
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