Is First Trust Dow Jones Global Select Dividend ETF (FGD) a Strong ETF Right Now?

Designed to provide broad exposure to the Broad Developed World ETFs category of the market, the First Trust Dow Jones Global Select Dividend ETF (FGD) is a smart beta exchange traded fund launched on 11/21/2007.

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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.

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

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.

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.

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

Managed by First Trust Advisors, FGD has amassed assets over $495.99 million, making it one of the average sized ETFs in the Broad Developed World ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Dow Jones Global Select Dividend Index.

The Dow Jones Global Select Dividend Index is an indicated annual dividend yield weighted index of 100 stocks selected from the developed-market portion of the Dow Jones World Index.

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.

Annual operating expenses for this ETF are 0.57%, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 6.88%.

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, Fortescue Metals Group Limited (FMG.AU) accounts for about 2.75% of the fund’s total assets, followed by A.p. Moeller – Maersk A/s (class A) (MAERSKA.DC) and Mitsui O.s.k. Lines, Ltd. (9104.JP).

The top 10 holdings account for about 16.86% of total assets under management.

Performance and Risk

So far this year, FGD has lost about -18.32%, and is down about -18.20% in the last one year (as of 11/02/2022). During this past 52-week period, the fund has traded between $18.30 and $26.73.

FGD has a beta of 0.92 and standard deviation of 26.23% for the trailing three-year period, which makes the fund a low risk choice in the space. With about 101 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Dow Jones Global Select Dividend ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares MSCI ACWI ETF (ACWI) tracks MSCI All Country World Index and the Vanguard Total World Stock ETF (VT) tracks FTSE Global All Cap Index. IShares MSCI ACWI ETF has $15.59 billion in assets, Vanguard Total World Stock ETF has $21.76 billion. ACWI has an expense ratio of 0.32% and VT charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World 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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