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

Zacks Equity Research

Launched on 11/21/2007, the First Trust Dow Jones Global Select Dividend ETF (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?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

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

Because the fund has amassed over $627.19 M, this makes it one of the average sized ETFs in the Broad Developed World ETFs. FGD is managed by First Trust Advisors. FGD, before fees and expenses, 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.

Operating expenses on an annual basis are 0.58% for FGD, making it one of the more expensive products in the space.

FGD's 12-month trailing dividend yield is 5.23%.

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.

Taking into account individual holdings, Standard Life Aberdeen Plc (SLA.LN) accounts for about 2.10% of the fund's total assets, followed by Azimut Holding Spa (AZM.IM) and Be Semiconductor Industries N.v. (BESI.NA).

Its top 10 holdings account for approximately 16.48% of FGD's total assets under management.

Performance and Risk

Year-to-date, the First Trust Dow Jones Global Select Dividend ETF has lost about -0.64% so far, and is up about 10.35% over the last 12 months (as of 02/06/2020). FGD has traded between $21.13 and $25.10 in this past 52-week period.

The fund has a beta of 0.82 and standard deviation of 11.53% for the trailing three-year period, which makes FGD a low risk choice in this particular space. With about 98 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Dow Jones Global Select Dividend ETF 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 $10.69 B in assets, Vanguard Total World Stock ETF has $13.77 B. ACWI has an expense ratio of 0.32% and VT 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 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.


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First Trust Dow Jones Global Select Dividend ETF (FGD): ETF Research Reports
 
iShares MSCI ACWI ETF (ACWI): ETF Research Reports
 
Vanguard Total World Stock ETF (VT): ETF Research Reports
 
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