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

Sweta Killa

The WisdomTree Japan SmallCap Dividend Fund (DFJ) made its debut on 06/16/2006, and is a smart beta exchange traded fund that provides broad exposure to the Asia-Pacific (Developed) 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.

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.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

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.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $507.38 M, this makes it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. DFJ is managed by Wisdomtree. This particular fund, before fees and expenses, seeks to match the performance of the WisdomTree Japan SmallCap Dividend Index.

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

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 this ETF, which makes it one of the more expensive products in the space.

DFJ's 12-month trailing dividend yield is 2.06%.

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.

Looking at individual holdings, Haseko Corp accounts for about 1.14% of total assets, followed by Matsui Securities Co Ltd and Aozora Bank Ltd.

DFJ's top 10 holdings account for about 7.15% of its total assets under management.

Performance and Risk

Year-to-date, the WisdomTree Japan SmallCap Dividend Fund has added roughly 4.92% so far, and is down about -8.72% over the last 12 months (as of 07/17/2019). DFJ has traded between $60.90 and $78.44 in this past 52-week period.

The ETF has a beta of 0.67 and standard deviation of 13.28% for the trailing three-year period, making it a medium risk choice in the space. With about 823 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree Japan SmallCap Dividend Fund is an excellent option for investors seeking to outperform the Asia-Pacific (Developed) ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

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 $3.84 B in assets, iShares MSCI Japan ETF has $12.62 B. BBJP has an expense ratio of 0.19% and EWJ charges 0.47%.

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 Fund (DFJ): ETF Research Reports
 
iShares MSCI Japan ETF (EWJ): ETF Research Reports
 
JPMorgan BetaBuilders Japan ETF (BBJP): ETF Research Reports
 
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