Launched on 06/16/2006, the WisdomTree Japan SmallCap Dividend ETF (DFJ Quick QuoteDFJ - Free Report) is a smart beta exchange traded fund offering 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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

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.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

Managed by Wisdomtree, DFJ has amassed assets over $238.63 million, making it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. DFJ, before fees and expenses, seeks to match the performance of the WisdomTree Japan SmallCap Dividend Index.

The WisdomTree Japan SmallCap Dividend Index is comprised of dividend-paying small capitalization companies in Japan.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.58% for DFJ, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 1.86%.

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, Horiba Ltd accounts for about 0.72% of the fund's total assets, followed by Daido Steel Co Ltd and Amano Corp.

Its top 10 holdings account for approximately 5.68% of DFJ's total assets under management.

Performance and Risk

So far this year, DFJ has gained about 5.70%, and was up about 17.77% in the last one year (as of 10/17/2024). During this past 52-week period, the fund has traded between $66.06 and $81.42.

DFJ has a beta of 0.48 and standard deviation of 15.65% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 729 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree Japan SmallCap Dividend ETF 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 Quick QuoteBBJP - Free Report) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ Quick QuoteEWJ - Free Report) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $12.19 billion in assets, iShares MSCI Japan ETF has $14.82 billion. BBJP has an expense ratio of 0.19% and EWJ charges 0.50%.

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.