Is First Trust STOXX European Select Dividend ETF (FDD) a Strong ETF Right Now?
Designed to provide broad exposure to the European Equity ETFs category of the market, the First Trust STOXX European Select Dividend ETF (FDD) is a smart beta exchange traded fund launched on 08/27/2007.
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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
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.
FDD is managed by First Trust Advisors, and this fund has amassed over $467.41 million, which makes it one of the average sized ETFs in the European Equity ETFs. This particular fund seeks to match the performance of the STOXX Europe Select Dividend 30 Index before fees and expenses.
The STOXX Europe Select Dividend 30 Index consists of 30 high dividend-yielding securities selected from the STOXX Europe 600 Index.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.59% for FDD, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 5.82%.
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
When you look at individual holdings, Taylor Wimpey Plc (TW/.LN) accounts for about 5.46% of the fund's total assets, followed by Aker Bp Asa (AKRBP.NO) and Legal & General Group Plc (LGEN.LN).
FDD's top 10 holdings account for about 41.91% of its total assets under management.
Year-to-date, the First Trust STOXX European Select Dividend ETF has added roughly 36% so far, and is up about 29.58% over the last 12 months (as of 05/30/2025). FDD has traded between $11.07 and $15.24 in this past 52-week period.
FDD has a beta of 0.84 and standard deviation of 19.23% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 34 holdings, it has more concentrated exposure than peers.
First Trust STOXX European Select Dividend ETF is a reasonable option for investors seeking to outperform the European Equity ETFs segment of the market. However, there are other ETFs in the space which investors could 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 $7.90 billion in assets, Vanguard FTSE Europe ETF has $24.50 billion. EZU has an expense ratio of 0.51% and VGK charges 0.06%.
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.
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 ETF (FDD): ETF Research Reports
iShares MSCI Eurozone ETF (EZU): ETF Research Reports
Vanguard FTSE Europe ETF (VGK): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
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