U.S. Markets close in 5 hrs 54 mins

Is First Trust Dow Jones Global Select Dividend Index Fund (FGD) a Hot ETF Right Now?

Zacks Equity Research
The deployment of 1-gigabit wireline networks, wireless/wireline converged networks and an increase in core market share are likely to aid Dycom's (DY) fiscal Q3 results. However, under-absorption of labor and field costs is a cause of concern.

Launched on 11/21/2007, the First Trust Dow Jones Global Select Dividend Index Fund (FGD) is a smart beta exchange traded fund offering broad exposure to the Broad Developed World 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.

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.

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.

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 sponsored by First Trust Advisors. It has amassed assets over $487.41 M, making it one of the average sized ETFs in the Broad Developed World ETFs. Before fees and expenses, this particular fund seeks to match the performance of the Dow Jones Global Select Dividend Index.

This Index is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics 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 4.50%.

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.

Taking into account individual holdings, Centurylink, Inc. (CTL) accounts for about 2.92% of the fund's total assets, followed by Galliford Try Plc (GFRD.LN) and Gamestop Corp. (class A) (GME).

Its top 10 holdings account for approximately 17.27% of FGD's total assets under management.

Performance and Risk

The ETF has lost about -0.57% and is up roughly 3.40% so far this year and in the past one year (as of 09/28/2018), respectively. FGD has traded between $24.54 and $28.07 during this last 52-week period.

The ETF has a beta of 0.87 and standard deviation of 13.91% for the trailing three-year period, making it a low choice in the space. With about 101 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Dow Jones Global Select Dividend Index Fund is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares MSCI ACWI ETF (ACWI) tracks MSCI All Country World Index and the Vanguard Total World Stock ETF (VT) tracks FTSE Global All Cap Index. IShares MSCI ACWI ETF has $8.96 B in assets, Vanguard Total World Stock ETF has $12.08 B. ACWI has an expense ratio of 0.32% and VT charges 0.10%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World 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.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
FT-DJ GL SEL DV (FGD): ETF Research Reports
 
ISHRS-MSCI ACWI (ACWI): ETF Research Reports
 
GameStop Corp. (GME) : Free Stock Analysis Report
 
CenturyLink, Inc. (CTL) : Free Stock Analysis Report
 
VANGD-TOT W STK (VT): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research