The FlexShares Quality Dividend ETF (QDF) was launched on 12/14/2012, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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, QDF has amassed assets over $1.85 billion, making it one of the larger ETFs in the Style Box - All Cap Blend. Before fees and expenses, QDF seeks to match the performance of the Northern Trust Quality Dividend Index.
The Northern Trust Quality Dividend Index is designed to provide exposure to a high-quality income-oriented portfolio of long-only U.S. equity securities, with an emphasis on long-term capital growth and a targeted overall beta that is similar to that of the Northern Trust 1250 Index and the Index are selected based on expected dividend payment and fundamental factors.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.37% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.81%.
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.
This ETF has heaviest allocation in the Financials sector - about 38.80% of the portfolio. Information Technology and Healthcare round out the top three.
Looking at individual holdings, Apple Inc Common Stock Usd 0.00001 (AAPL) accounts for about 9.22% of total assets, followed by Microsoft Corp Common Stock Usd 0.00000625 (MSFT) and Nvidia Corp Common Stock Usd 0.001 (NVDA).
The top 10 holdings account for about 37.56% of total assets under management.
Performance and Risk
Year-to-date, the FlexShares Quality Dividend ETF has gained about 15.12% so far, and it's up approximately 23.25% over the last 12 months (as of 08/26/2024). QDF has traded between $53.52 and $70.30 in this past 52-week period.
The fund has a beta of 0.97 and standard deviation of 15.83% for the trailing three-year period, which makes QDF a medium risk choice in this particular space. With about 134 holdings, it effectively diversifies company-specific risk.
Alternatives
FlexShares Quality Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $60.65 billion in assets, Vanguard Total Stock Market ETF has $426.26 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Blend.
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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Vanguard Total Stock Market ETF (VTI): ETF Research Reports
iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports
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