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Is WisdomTree Japan SmallCap Dividend ETF (DFJ) a Strong ETF Right Now?

Zacks Equity Research
·4 min read

The WisdomTree Japan SmallCap Dividend ETF (DFJ) was launched on 06/16/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Asia-Pacific (Developed) 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.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

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.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is managed by Wisdomtree, and has been able to amass over $241.59 million, which makes it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. DFJ seeks to match the performance of the WisdomTree Japan SmallCap Dividend Index before fees and expenses.

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

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.58%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 2.49%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Haseko Corp accounts for about 1.30% of the fund's total assets, followed by Mitsubishi Gas Chemical Co Inc and Matsui Securities Co Ltd.

Its top 10 holdings account for approximately 7.36% of DFJ's total assets under management.

Performance and Risk

So far this year, DFJ has lost about -18.62%, and is down about -10.96% in the last one year (as of 05/28/2020). During this past 52-week period, the fund has traded between $49.20 and $75.84.

The fund has a beta of 0.69 and standard deviation of 19.72% for the trailing three-year period, which makes DFJ a medium risk choice in this particular space. With about 799 holdings, it effectively diversifies company-specific risk.

Alternatives

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 $2.85 billion in assets, iShares MSCI Japan ETF has $9.49 billion. BBJP has an expense ratio of 0.19% and EWJ charges 0.49%.

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.

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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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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Zacks Investment Research