The quality factor is one of the most venerable investment factors and plenty of exchange traded funds offer investors exposure to this factor. The iShares Edge MSCI USA Quality Factor ETF (BATS: QUAL) is an increasingly popular option for investors looking to tap the quality factor.
The quality factor is a point of emphasis for a growing number of strategic beta exchange traded funds. Though there has been debate surrounding defining quality as it pertains to factor-based investing, quality companies and dividend-paying stocks often go hand-in-hand because those dividends are seen as signs of stable earnings and thoughtful management.
QUAL, which turned four years old last month, follows the MSCI USA Sector Neutral Quality Index and holds 125 stocks.
“The index identifies high quality growth companies that trades in the United States with three fundamental factors: high return on equity [ROE], stable and consistent YoY earnings growth, and a low financial leverage. With an asset under management of 3.55 billion and an average trading volume of 326K in the past 10 days, the ETF offers enough liquidity for investors,” according to a Seeking Alpha analysis of the ETF.