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

Sweta Killa

The First Trust Dow Jones Global Select Dividend Index Fund (FGD) was launched on 11/21/2007, and is a smart beta exchange traded fund designed to offer broad exposure to the Broad Developed World ETFs category of the market.

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.

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.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

FGD is managed by First Trust Advisors, and this fund has amassed over $603.65 M, which makes it one of the average sized ETFs in the Broad Developed World ETFs. 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

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.

Operating expenses on an annual basis are 0.58% for this ETF, which makes it one of the more expensive products in the space.

It's 12-month trailing dividend yield comes in at 5.24%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Azimut Holding Spa (AZM.IM) accounts for about 1.99% of the fund's total assets, followed by Standard Life Aberdeen Plc (SLA.LN) and Be Semiconductor Industries N.v. (BESI.NA).

The top 10 holdings account for about 16.39% of total assets under management.

Performance and Risk

The ETF return is roughly 19.06% so far this year and it's up approximately 19.69% in the last one year (as of 12/19/2019). In the past 52-week period, it has traded between $21.06 and $24.86.

The ETF has a beta of 0.80 and standard deviation of 11.46% for the trailing three-year period, making it a low risk choice in the space. With about 105 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 $11.14 B in assets, Vanguard Total World Stock ETF has $13.01 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 Index Fund (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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