A profitability score is also taken based on a firm’s relative competitive advantage across several metrics. Firms with wider margins typically are better positioned to expand compared to those with tighter margins.
Lastly, cash flow provides a better understanding of liquidity levels for a company. A firm that does not meet its debt obligations and day-to-day liquidity needs are likely to be poorly positioned to take advantage of future opportunities or have a financial cushion during downturns.
By evaluating these different quality facets, FlexShares is better able to determine the likelihood that a company can issue sustainable dividend payouts.
For more information on dividend-generating ideas, visit our dividend ETFs category.