This week has been kind to income investors looking for new
to consider as Northern Trust's (NASDAQ:
) FlexShares unit has
rolled out three new global dividend funds
The FlexShares International Quality Dividend Dynamic Index
) is part of that trio and represents the one of the three new
ETFs that seeks a beta that is higher than its underlying index,
in this case the Northern Trust International Large Cap
As is the case with its newly minted brethren, the FlexShares
International Quality Dividend Index Fund (NYSE:
) and the FlexShares International Quality Dividend Defensive
Index Fund (NYSE:
), IQDY eschews the typical cap-weighting methodology that is
prevalent with so many ETFs. The new ETFs also pass on
using length of dividend increase streaks
as a primary screening tool.
Rather, IQDY uses "an optimization process designed to:
maximize this factor, target a beta higher than the Parent Index
and improve on the Parent Index's dividend yield,
according to FlexShares
With an expense ratio of 0.47 percent per year, IQDY holds 220
stocks and joins its new peers in being heavily focused on the
U.K. and Japan. Those two countries combine for 32.7 percent of
IQDY's weight. Australia, Germany and China round out the top
five country allocations.
IQDY also shares something in common with its new FlexShares
peers at the sector, that being a sizable allocation to financial
services stocks. That sector accounts for 27.7 percent of the
fund's weight. Perhaps in efforts to generate beta in excess of
its underlying index, IQDY's also features double-digit
allocations to industrial, energy and materials names.
On the other hand, the new ETF is relatively light on
so-called dividend sectors. Consumer staples, health care,
telecommunications and utilities combine for less than a quarter
of IQDY's sector weight.
IQDY's top-10 holdings include Commonwealth Bank of Australia,
), Eni (NYSE:
), Royal Dutch Shell (NYSE: RDS-A) and Suncor (NYSE:
). Yield information on IQDY is not yet available, but the
average yield on AstraZeneca, Royal Dutch Shell, Suncro and Eni
is 4.7 percent, indicating IQDY could be home to at, the very
least, a decent yield. Additionally, the iShares Dow Jones
International Select Dividend Index Fund (NYSE:
), an ETF IQDY could be a potential rival, has a trailing
12-month dividend yield of 4.85 percent.
Investors looking for a domestic equivalent of IQDY should
look at the FlexShares Quality Dividend Dynamic Index Fund (NYSE:
). That ETF, along with two other domestically-focused FlexShares
dividend funds, debuted in December.
While QDYN is not yet large in terms of assets, it uses a
similar screening methodology to what is seen with IQDY and that
could mean good fortune for investors, particularly if European
stocks turn around. QDYN has gained almost 11 percent since
inception and has a weighted average dividend yield of 3.43
As is usually the case with ETFs that are just a few days old,
there is obviously not much of a track record with which to form
an opinion on IQDY. The ETF's Europe exposure implies some level
of risk, but if Japanese stocks continue soaring and Australian
stocks hold steady, investors will be buffered somewhat from
Europe-related shocks with this new fund. For the slightly
adventurous dividend investor, IQDY is worth keeping an eye on
over the medium-term.
For more on dividend ETFs, click
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