Inflation fears are not only spooking the equities markets, but the debt markets as well. In volatile times, it’s important to stress the importance of quality via funds like the FlexShares International Quality Dividend Index Fund (IQDF).
With credit spreads tightening, investors are less apt to take on the increased risk in order to get higher yield. That said, investors may also not want to take on the duration risk in order to get yields higher than 2%, which can be found in 20-year Treasury notes.
This is allowing investors to turn to other forms of yield.
Per the fund description, IQDF seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust International Quality Dividend Index. The index reflects the performance of a selection of companies that, in aggregate, possess greater financial strength and stability characteristics relative to the Northern Trust International Large Cap Index, a float-adjusted market-capitalization weighted index of non-U.S. domiciled large- and mid-capitalization companies.
Dividends in a Time of Value Over Growth
Midway through 2021, value is exceeding growth as global economies begin to re-open their doors. Not only does IQDF provide dividend distributions, it also captures upside in international equities that offer value-oriented dividends.
“The FlexShares International Quality Dividend Index Fund (IQDF) is part of Northern Trust’s stable of proprietary factor strategies,” an ETF Database analysis explained. “This one has an international flair. The fund follows a Northern Trust index that selects dividend-paying companies in developed and emerging markets outside the U.S. Simple enough, but then the index weights the portfolio toward companies that earned the highest ‘dividend quality’ scores.”
In order to prevent concentration risk, IQDF also employs a cap weighting strategy.
“To prevent unintentional concentrations, the methodology caps the weighting of individual securities, industry groups, sectors and regions,” the ETF Database analysis said further. “Lastly, the fund aims to match market beta — jargon used to describe how volatile performance is relative to the market. It’s another way of saying IQDF aims to be no more or less risky than the market.”
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