The quality dividend ETFs specifically screen for management efficiency, profitability and cash flow. Each company has to show management efficiency, or firms that efficiently deploy capital and make smart financing decisions. Companies with wider profit margins are better positions to grow and maintain dividends than those with slimmer margins. Additionally, firms that can meet debt obligations and day-to-day liquidity needs are better capable of maintaining dividends.
“By using several lenses to evaluate the actual financial health of the organization, the FlexShares’ Dividend Quality Score (DQS) is designed to provide insight into how well positioned a dividend-paying company is for success, and the expectations for future dividends under the current market/economic environments,” according to FlexSahres.
The DQS screening process evaluates dividend paying stocks across a number various factors and ranks those on a sector basis and compares firms on both a regional and sector basis. In this way, the screen compares like firms against one another and also serves to pick out those in every country and sector that support diversification through the construction process.
For more information on the global markets, visit our global ETFs category.