Is First Trust STOXX European Select Dividend Index Fund (FDD) a Strong ETF Right Now?
Launched on 08/27/2007, the First Trust STOXX European Select Dividend Index Fund (FDD) is a smart beta exchange traded fund offering broad exposure to the European Equity 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $312.21 M, which makes 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
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 0.57% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 5.20%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Sse Plc (SSE.LN) accounts for about 5.27% of the fund's total assets, followed by Royal Dutch Shell Plc (class B) (RDSB.LN) and Intesa Sanpaolo Spa (ISP.IM).
FDD's top 10 holdings account for about 40.35% of its total assets under management.
Performance and Risk
The ETF has added about 10.17% so far this year and is down about -0.10% in the last one year (as of 07/12/2019). In the past 52-week period, it has traded between $11.69 and $13.54.
The fund has a beta of 0.72 and standard deviation of 11.48% 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 Index Fund is not a suitable option for investors seeking to outperform the European Equity ETFs segment of the market. Instead, there are other ETFs in the space which investors should 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 $5.88 B in assets, Vanguard FTSE Europe ETF has $13.72 B. EZU has an expense ratio of 0.47% 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 Index Fund (FDD): ETF Research Reports
Vanguard FTSE Europe ETF (VGK): ETF Research Reports
iShares MSCI Eurozone ETF (EZU): ETF Research Reports
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