The stock market continues to rally back from 2020 with the S&P 500 gaining almost 20% year-to-date, but investors wanting more can look to ETFs like the FlexShares Quality Dividend Dynamic Index Fund (QDYN).
The ETF’s strategy is tailored towards selecting companies that can provide a sustainable dividend-producing record. As such, stability often skews towards large-cap companies that have a proven track record of dividends.
Per the fund description, QDYN’s underlying index targets management efficiency or quantitative evaluation of a firm’s deployment of capital and its financing decisions. By using a management efficiency screen, the index can screen out firms that aggressively pursue capital expenditures and additional financing, which typically lose flexibility in both advantageous and challenging partitions of the market cycle.
“Starting with the Parent Index, the Northern Trust 1250 Index4, which represents 1,250 large and mid-capitalization U.S. public companies, NTI first eliminates all non-dividend paying stocks,” a FlexShares Fund Focus said. “Then, they apply a multi-faceted Dividend Quality Score (DQS) to measure a company’s core financial health and evaluate whether it may increase (or decrease) its future dividends.”
As mentioned, QDYN essentially plays the long game when it comes to dividend investing. The fund’s strategy uses a quality filter to extract the holdings that can sustain dividend payouts over time.
“The DQS approach to underlying index construction recognizes the real-world goals behind dividend investing strategies—namely, to generate sustainable income from a portfolio and to harness the long-term return potential of dividend-paying stocks,” the Fund Focus said.
A Dividend to Go With Price Appreciation
Not only do investors get an ETF that outpaces the S&P 500, QDYN also offers a quarterly dividend. Investors get an income-producing fund that tracks higher than the current benchmark 10-year Treasury note.
This is useful given the rising tide of consumer prices across the board. In order to stay ahead of inflation, getting income-producing assets can help stem the tide.
“Investors keep hearing about rising labor costs and supply shortages that have helped feed inflation,” a MarketWatch report said. “It’s a time for long-term thinking about how to stay ahead — that is, how to avoid losing buying power.”
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