Is WisdomTree Japan SmallCap Dividend ETF (DFJ) a Strong ETF Right Now?

Making its debut on 06/16/2006, smart beta exchange traded fund WisdomTree Japan SmallCap Dividend ETF (DFJ) provides investors broad exposure to the Asia-Pacific (Developed) 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.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

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.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Because the fund has amassed over $316.06 million, this makes it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. DFJ is managed by Wisdomtree. Before fees and expenses, DFJ 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.

The fund has a 12-month trailing dividend yield of 2.30%.

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.

Looking at individual holdings, Us Dollar accounts for about 98.04% of total assets, followed by Dreyfus Trsy Oblig Cash Mgmt Cl Ins and Toyo Tire Co.

DFJ's top 10 holdings account for about 104.22% of its total assets under management.

Performance and Risk

The ETF has gained about 27.23% and is up about 30.47% so far this year and in the past one year (as of 10/28/2025), respectively. DFJ has traded between $70.93 and $96.68 during this last 52-week period.

DFJ has a beta of 0.42 and standard deviation of 15.28% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 762 holdings, it effectively diversifies company-specific risk .

Alternatives

WisdomTree Japan SmallCap Dividend ETF is a reasonable option for investors seeking to outperform the Asia-Pacific (Developed) ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

JPMorgan BetaBuilders Japan ETF (BBJP) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $14.71 billion in assets, iShares MSCI Japan ETF has $15.45 billion. BBJP has an expense ratio of 0.19% and EWJ changes 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

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This article originally published on Zacks Investment Research (zacks.com).

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