A New Japan ETF On Dividend Growth Hits The Market

WisdomTree appears in no mood to get over the Japan investing spree. It has WisdomTree Japan Hedged Equity (NYSE:DXJ) – a billion-dollar Japan ETF in its kitty. Apart from this, it operates WisdomTree Japan Hedged SmallCap Equity (NASDAQ:DXJS), Japan Hedged Dividend Growth Fund (JHDG)) and several sector-specific Japan ETFs.

While WisdomTree’s currency-hedged ETF versions have made a killing thus far, the issuer is bolstering the pipeline of non-currency hedged Japan ETFs. In this pursuit, WishdomTree recently launched Japan Dividend Growth Fund (JDG). Let’s delve a little deeper (read: Four Reasons to Buy WisdomTree ETFs).

JDG in Focus

The new ETF follows the WisdomTree Japan Dividend Growth Index. The fund consists of about 217 companies. The stocks are screened on a combined basis of growth and quality factors in order to give a comprehensive approach to dividend investing.

Growth factors like long-term earnings growth expectations and quality factors like historical return on equity, and return on assets are the criteria looked upon while including stocks to build up the index. The stocks need to exhibit a higher earnings yield than dividend yield for an entry to the index.

Consumer discretionary rules the fund with over 20% exposure. Industrials (19.4%), Telecom (15.25%), IT (14.67%) and Consumer Staples (10.69%) also get double-digit weight each. NTT DOCOMO Inc (NYSE:DCM) (5.8%), Nippon Telegraph & Telephone Corp (TOKYO:9432) (5.4%) and Japan Tobacco Inc (OTC:JAPAF) (4.51%) round out the top three spots of the ETF. It charges 43 bps in fees.

How Does it Fit in a Portfolio?

International dividend investing has taken center stage lately on a flurry of monetary easing. This was truer in the case of Japan as the country enhanced its asset buying program to 80 trillion yen a year at October end at the previous rate of 60–70 trillion yen to boost a sagging economy. This makes the high-dividend Japanese investing an intriguing bet for yield-hungry investors as rates are at rock-bottom levels (read: Introductory Guide to Japan ETF Investing).

The country’s key stock index Nikkei hit 15-year highs this year. With Japanese consumer spending still remaining soft, we expect this gigantic stimulus measure to stay for some more time. This makes the launch well timed (read: Nikkei Hits fresh 15-Year High: 3 Japan ETFs to Buy).

ETF Competition

Focusing on the dividend equities in the Japan equities ETF space is not new. The space is already ruled by some admired ETFs including iShares MSCI Japan (NYSE:EWJ), WisdomTree Japan SmallCap Dividend (NYSE:DFJ) and First Trust Japan AlphaDEX (NYSE:FJP).

However, JDG could still emerge as a winner as the product targets the blend of growth and value factors. Revolving around earnings growth, ROA and ROE, it would result in a more growth-oriented dividend portfolio as opposed to plain market-cap oriented products or several other value based ETFs.

The space topper with over $19 billion AUM, currently yields 1.13% (as of June 5, 2015) while DFJ and FJP respectively yield 1.40% and 0.94%. The underlying index of JDG, WisdomTree Japan Dividend Growth Index, yields 1.93% in dividend, as per the issuer.

There is yet another benefit for JDG as it charges lesser than the top-three discussed ETFs. From this point of view, JDG should see some unbeaten success, going forward.

Original post