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Is FlexShares International Quality Dividend ETF (IQDF) a Strong ETF Right Now?

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A smart beta exchange traded fund, the FlexShares International Quality Dividend ETF (IQDF) debuted on 04/12/2013, and offers broad exposure to the World 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.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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

Managed by Flexshares, IQDF has amassed assets over $625.46 million, making it one of the larger ETFs in the World ETFs. IQDF, before fees and expenses, seeks to match the performance of the Northern Trust International Quality Dividend Index.

The Northern Trust International Quality Dividend Index is designed to provide exposure to a high-quality income-oriented portfolio of long-only international securities issued by non-U.S.-based companies, with an emphasis on long-term capital growth and a targeted overall beta that is similar to that of the Northern Trust International Large Cap Index.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.47% for this ETF, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 3.45%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Taiwan Semiconductor Manufacturing Co Ltd Common accounts for about 2.13% of the fund's total assets, followed by L'oreal Sa Common Stock Eur 0.2 (OR) and Roche Holding Ag Common Stock Chf 0 (ROG).

The top 10 holdings account for about 15.89% of total assets under management.

Performance and Risk

The ETF has added roughly 11.22% and is up about 30.29% so far this year and in the past one year (as of 11/04/2021), respectively. IQDF has traded between $21.40 and $27.61 during this last 52-week period.

IQDF has a beta of 0.86 and standard deviation of 20.24% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 290 holdings, it effectively diversifies company-specific risk.

Alternatives

FlexShares International Quality Dividend ETF is a reasonable option for investors seeking to outperform the World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

FlexShares International Quality Dividend Defensive ETF (IQDE) tracks Northern Trust International Quality Dividend Defensive Index and the FlexShares International Quality Dividend Dynamic ETF (IQDY) tracks Northern Trust International Quality Dividend Dynamic Index. FlexShares International Quality Dividend Defensive ETF has $71.52 million in assets, FlexShares International Quality Dividend Dynamic ETF has $77.23 million. IQDE has an expense ratio of 0.47% and IQDY charges 0.47%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the World ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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