Barclays Global Investors (BGI) launched a new, globally focused dividend exchange-traded fund (ETF) onto the New York Stock Exchange Arca unit (NYSE) on June 15. The iShares Dow Jones EPAC Select Dividend Index Fund (NYSE: IDV) tracks 100 of the highest-yielding equities in Europe, the Pacific, Asia and Canada. The underlying index boasts a strong 4.18% yield, well above the popular U.S. Select Dividend Index (3.35%). It is dominated by Financials exposure (43%), and by exposure to Australia (37%) and the U.K. (32%). The new ETF charges 50 basis points (0.50%) in expenses.

BGI is positioning this ETF as a major new innovation, using the advertising tag line, “Your search for a non-US dividend ETF is over.” Of course, WisdomTree has actually been offering international dividend ETFs for a full year now; coincidentally, the birthday of the original WisdomTree ETFs was June 16, 2006. The question for investors is how the new iShares IDV ETF compares with the comparable WisdomTree funds.

WisdomTree offers two ETFs that directly compete with the iShares fund: the WisdomTree DEFA Fund (NYSE: DWM) and the WisdomTree DEFA High-Yielding Equity Fund (NYSE: DTH). Both track the performance of dividend-paying stocks in Europe, Far East Asia and Australasia, and both weight stocks by the cash value of dividends paid. The difference between the two ETFs is that DWM includes substantially all dividend-paying stocks, while DTH only includes the 30% with the highest dividend yield.

One of the most obvious difference between the three funds is the number of components. The iShares fund focuses on the top 100 securities, while DTH holds 352 stocks (as of March 31, 2007) and DWM holds 570 (as of March 31, 2007).

The holding counts are a reflection of the fact htat each fund captures a very different segment of the market.

In practice, this means that the Dow Jones fund has a slight small-cap tilt versus the WisdomTree funds. WisdomTree argues that its indexes are more “investable” and are better representations of the market. It's certainly true that DWM, the "core" WisdomTree fund, more closely resembles the benchmark MSCI EAFE (Europe, Australasia and Far East) index than do either IDV or DTH.

A Look At The Numbers

The differences in index methodology play out in notable statistical differences between the three indexes and funds.

Country Weights

One difference is that the Dow Jones/iShares index includes Canada, while the WisdomTree benchmarks do not. This isn’t a huge difference, however, as Canada has only a 2.4% weight in the Dow Jones index.

Much bigger differences exist at the macro level. For instance, as of March 31, 2007, the Dow Jones index had a 37% weight in Australia, while the WisdomTree DEFA index had a 9% weight and the WisdomTree DEFA High-Yielding Index had a 13% weight. Similarly, France made up 13% of WisdomTree’s DEFA index and 12% of its High Yield index, but had little-to-no representation in the Dow Jones benchmark.

The table below showcases the top five country weights for each index. The presence of Japan in DWM is noteworthy, as Japan is the second-largest country in the MSCI EAFE Index, but has little representation in either IDV or DTH.

Generally speaking, IDV is overweight Australia and Hong Kong, and underweight France, Japan and Germany, as compared with the WisdomTree ETFs.

Industry Weights

Financial Ratios