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Is FlexShares International Quality Dividend ETF (IQDF) a Strong ETF Right Now?

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The FlexShares International Quality Dividend ETF (IQDF - Free Report) was launched on 04/12/2013, and is a smart beta exchange traded fund designed to offer broad exposure to the World ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

IQDF is managed by Flexshares, and this fund has amassed over $492.08 million, which makes it one of the larger ETFs in the World ETFs. Before fees and expenses, IQDF seeks to match the performance of the Northern Trust International Quality Dividend Index.

The Northern Trust International Quality Dividend Index is designed to provide exposure to a high-quality income-oriented portfolio of long-only international securities issued by non-U.S.-based companies, with an emphasis on long-term capital growth and a targeted overall beta that is similar to that of the Northern Trust International Large Cap Index.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.47% for this ETF, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 6.06%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Taking into account individual holdings, Roche Holding Ag Common Stock Chf 0 (ROG - Free Report) accounts for about 2.32% of the fund's total assets, followed by L'oreal Sa Common Stock Eur 0.2 (OR - Free Report) and Nestle Sa Common Stock Chf 0.1 (NESN).

The top 10 holdings account for about 17.76% of total assets under management.

Performance and Risk

The ETF has lost about -18.94% and is down about -17.37% so far this year and in the past one year (as of 07/21/2022), respectively. IQDF has traded between $19.54 and $26.88 during this last 52-week period.

The fund has a beta of 0.84 and standard deviation of 21.27% for the trailing three-year period, which makes IQDF a medium risk choice in this particular space. With about 305 holdings, it effectively diversifies company-specific risk.

Alternatives

FlexShares International Quality Dividend ETF is a reasonable option for investors seeking to outperform the World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

FlexShares International Quality Dividend Defensive ETF (IQDE - Free Report) tracks Northern Trust International Quality Dividend Defensive Index and the FlexShares International Quality Dividend Dynamic ETF (IQDY - Free Report) tracks Northern Trust International Quality Dividend Dynamic Index. FlexShares International Quality Dividend Defensive ETF has $55.48 million in assets, FlexShares International Quality Dividend Dynamic ETF has $68.28 million. IQDE has an expense ratio of 0.47% and IQDY charges 0.47%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the World ETFs.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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