Is WisdomTree Japan SmallCap Dividend ETF (DFJ) a Strong ETF Right Now?
Smart Beta ETF report for DFJ
Designed to provide broad exposure to the Asia-Pacific (Developed) ETFs category of the market, the WisdomTree Japan SmallCap Dividend ETF (DFJ) is a smart beta exchange traded fund launched on 06/16/2006.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
The fund is sponsored by Wisdomtree. It has amassed assets over $236.44 million, making it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. Before fees and expenses, DFJ 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
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.
Annual operating expenses for DFJ are 0.58%, which makes it one of the more expensive products in the space.
DFJ's 12-month trailing dividend yield is 2.22%.
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.
Looking at individual holdings, Nippon Yusen Kk accounts for about 0.94% of total assets, followed by Seven Bank Ltd and Jtekt Corp.
The top 10 holdings account for about 6.94% of total assets under management.
Performance and Risk
Year-to-date, the WisdomTree Japan SmallCap Dividend ETF return is roughly 6.08% so far, and was up about 9.72% over the last 12 months (as of 10/07/2021). DFJ has traded between $68.06 and $81.51 in this past 52-week period.
The fund has a beta of 0.58 and standard deviation of 21.06% for the trailing three-year period, which makes DFJ a medium risk choice in this particular space. With about 700 holdings, it effectively diversifies company-specific risk.
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) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $8.90 billion in assets, iShares MSCI Japan ETF has $12.75 billion. BBJP has an expense ratio of 0.19% and EWJ charges 0.51%.
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 ETF (DFJ): ETF Research Reports
iShares MSCI Japan ETF (EWJ): ETF Research Reports
JPMorgan BetaBuilders Japan ETF (BBJP): ETF Research Reports
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