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Is First Trust STOXX European Select Dividend ETF (FDD) a Strong ETF Right Now?

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·4 min read
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The First Trust STOXX European Select Dividend ETF (FDD) made its debut on 08/27/2007, and is a smart beta exchange traded fund that provides broad exposure to the European Equity ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

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

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

The fund is managed by First Trust Advisors. FDD has been able to amass assets over $333.62 M, making it one of the larger ETFs in the European Equity ETFs. This particular fund, before fees and expenses, seeks to match the performance of the STOXX Europe Select Dividend 30 Index.

The STOXX Europe Select Dividend 30 Index consists of 30 high dividend-yielding securities selected from the STOXX Europe 600 Index.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Operating expenses on an annual basis are 0.57% for FDD, making it on par with most peer products in the space.

FDD's 12-month trailing dividend yield is 4.73%.

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, Sse Plc (SSE.LN) accounts for about 6.34% of the fund's total assets, followed by Intesa Sanpaolo Spa (ISP.IM) and Societe Generale S.a. (GLE.FP).

FDD's top 10 holdings account for about 42.99% of its total assets under management.

Performance and Risk

So far this year, FDD has lost about -0.77%, and it's up approximately 14.78% in the last one year (as of 02/03/2020). During this past 52-week period, the fund has traded between $11.93 and $14.20.

The fund has a beta of 0.73 and standard deviation of 11.17% for the trailing three-year period, which makes FDD a medium risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust STOXX European Select Dividend ETF is a reasonable option for investors seeking to outperform the European Equity ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares MSCI Eurozone ETF (EZU) tracks MSCI EMU Index and the Vanguard FTSE Europe ETF (VGK) tracks FTSE Developed Europe All Cap Index. IShares MSCI Eurozone ETF has $5.60 B in assets, Vanguard FTSE Europe ETF has $14.30 B. EZU has an expense ratio of 0.49% and VGK 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 European Equity 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 STOXX European Select Dividend ETF (FDD): ETF Research Reports
 
Vanguard FTSE Europe ETF (VGK): ETF Research Reports
 
iShares MSCI Eurozone ETF (EZU): ETF Research Reports
 
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