Markets continue to swing up with the holiday spending rush, even as a cloud of doubt that is the ‘fiscal cliff’ surrounds trading. As many companies have planned last minute dividends and payouts to decrease their own tax liability, FlexShares is rolling out three unique dividend seeking ETFs for the current income oriented investor. This is just the first of a broader lineup planned by FlexShares, and we expect to see even more launches from Northern Trust’s ETF branch in 2013 [see 101 High Yielding ETFs For Every Dividend Investor].
The new ETFs include:
- FlexShares Quality Dividend Index Fund (QDF)
- FlexShares Quality Dividend Defensive Index Fund (QDEF)
- FlexShares Quality Dividend Dynamic Index Fund (QDYN)
Each of the new ETFs will face competition from over 50 existing dividend centric products; in addition to a number of broad-based equity ETPs that invest in high quality and current income companies [see our Monthly Dividend ETFdb Portfolio ].
Differentiating Dividend ETFs
The three new dividend ETFs all follow a common strategy, investing in a high quality, income oriented portfolio of long, U.S. only, equities with an emphasis on long-term capital growth. There won’t be a universally superior ETF strategy differentiation that makes sense for every investor; the product right for your portfolio depends on individual circumstances [see 101 ETF Lessons Every Financial Advisor Should Learn].
There are, however, a few difference between these funds and factors to consider when comparing dividend ETFs head-to-head:
- Dividend Index: This cookie cutter strategy is the least specialized within dividend investing, sticking instead to the basics. Companies included in QDF’s index are selected based on expected dividend payment and fundamental factors such as profitability, solid management, and reliable cash flow.
- Dividend Defensive Index: Using the same basis for company selection as the fund profiled above, QDEF offers a lower beta, making this ETF ideal for investors who need stable and consistent income with few surprises.
- Dividend Dynamic Index : The other end of the spectrum, QDYN offers more volatility than QDF, and looks to maximize its current income with a more dynamic portfolio as its name suggests. QDYN could be a good fit for investors used to more risk and are not relying on current income investments to maintain livelihood.
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Disclosure: No positions at time of writing.
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