Under The Hood: Take The Asia, Leave The Japan

The experts say Japanese stocks are cheap and have been saying that for a while. In late 2011, famed investors Warren Buffett and Jim Rogers said Japanese equities were cheap. In 2012, there has been no shortage of market observers offering up the same sentiment. Thing is, just because a market looks cheap does not mean it will deliver noteworthy returns. That has been the case with Japan and

. Over the past five years, three years, year and year-to-date, the iShares MSCI Japan Index Fund

has offered negative annualized returns. Japan's struggles have not diminished the allure of investing in the Asia-Pacific region. Those looking to play the Asia-sans-Japan theme might want to have a look at the unheralded WisdomTree Asia Pacific ex-Japan Fund

. The WisdomTree Asia Pacific ex-Japan Fund has been around since June 2006 and in that time, the ETF has amassed almost $91 million in assets. AXJL embodies two of the ETF themes WisdomTree has been a pioneer of: Dividends

. It is the yield that helps distinguish AXJL. The fund currently has a 30-day SEC yield of 3.47 percent and a distribution yield of 5.43 percent. Comparable funds cannot even come close that. The SPDR S&P Emerging Asia Pacific ETF

yields just 2.33 percent. The The PowerShares FTSE RAFI Asia Pacific ex-Japan Portfolio

has a 30-day SEC yield of just 2.64 percent. AXJL illustrates two points some investors are already intimately familiar with: Dodging Japan while embracing dividends has proven efficacious in recent years. The fund boasts

and is in the green over the past year, year-to-date and over the past three years and five years. Despite the exclusion of Japan, AXJL is not overly risky at the country level. In fact, the ETF is heavily allocated to developed markets as Australia, Hong Kong and Singapore account for half of the fund's weight. Additionally, Taiwan and South Korea combine for over 20 percent of the fund's weight and a case can be made that

. Exotic fare does not account for much of AXJL's lineup. Combine Malaysia, Thailand, Indonesia, India and the Philippines and the result is less than 19 percent of the fund's weight. Indian exposure in AXJL does not come by way of individual stocks, but through the iPATH MSCI India Index ETN

. Financials and telecommunications dominate at the sector level, combing for almost 47 percent of the fund's weight. Regarding valuation, AXJL's index trades at about 13 times earnings and 1.7 times book value, two numbers that compare favorably with the older, larger iShares MSCI Pacific ex-Japan Index Fund

. Given the recent market doldrums and the notion that U.S. stocks are the best bet when it comes to developed market equities, AXJL requires some patience. The fund appears technically vulnerable and a drop below $63.75 could portend another $2 or more of downside. That said, the ETF's combination of strong yield, ex-Japan developed markets exposure and a decent expense ratio make the fund a good idea for long-term, income investors. They can just wait for better pricing. For more on "ex" ETFs, click

.