ETF Spotlight on the FlexShares Quality Dividend Defensive Index Fund (NYSEArca: QDEF), part of an ongoing series.
Assets: $72.7 million
Objective: The FlexShares Quality Dividend Index Fund tries to reflect the performance of the Northern Trust Quality Dividend Defensive Index, which is comprised of U.S. dividend paying large-cap stocks and optimizes its holdings based on a so-called quality factory.
Holdings: Top holdings include Apple (NasdaqGS: AAPL) 5.3%, Exxon Mobil (NYSE: XOM) 4.4%, Merck & Co (NYSE: MRK) 3.4%, Pfizer (NasdaqGS: PFE) 3.1% and Wells Fargo (NYSE: WFC) 2.2%.
What You Should Know:
- Northern Trusts’ FlexShares ETF unit sponsors the fund.
- QDEF has a 0.37% expense ratio.
- The ETF has 208 holdings and the top ten components make up 26.9% of the overall portfolio.
- Sector allocations include basic materials 3.2%, consumer discretionary 10.2%, financials 12.5%, real estate 6.3%, telecom 4.1%, energy 11.9%, industrials 10.3%, tech 13.4%, consumer staples 12.1%, healthcare 10.1% and utilities 6.2%.
- Market-cap allocations include mega-caps 39.3%, large-caps 21.4%, mid-caps 28.7% and small-caps 10.7%.
- The fund is up 4.2% over the past month, up 3.3% over the last three months and up 8.8% year-to-date.
- QDEF is trading 6.0% above its 200-day exponential moving average.
- The underlying index applies a proprietary scoring model approach to determine its “quality factor” as a way to provide lower beta, or risk.
- Specifically, the fund will focus on companies with a strong core financial health, including a company’s management efficiency, profitability and cash flow.
- The index also optimizes for dividend yield.
- QDEF has a 2.85% 12-month yield and dividends are paid out quarterly.
- “While dividend quality can be a strong driver of performance, the combination of quality and yield looks to produce compelling results,” according to FlexShares. “This works because quality and yield have not been highly correlated factors historically, so their combination may serve to smooth each respective factor’s cycle.”
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