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

Launched on 04/12/2013, the FlexShares International Quality Dividend ETF (IQDF) is a smart beta exchange traded fund offering broad exposure to the World ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

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.

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Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

Managed by Flexshares, IQDF has amassed assets over $479.93 million, making it one of the larger ETFs in the World ETFs. IQDF seeks to match the performance of the Northern Trust International Quality Dividend Index before fees and expenses.

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

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.47%, making it on par with most peer products in the space.

IQDF's 12-month trailing dividend yield is 5.96%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Royal Bank Of Canada Common Stock Cad 0 (RY) accounts for about 3.07% of the fund's total assets, followed by Roche Holding Ag Common Stock Chf 0 (ROG) and Nestle Sa Common Stock Chf 0.1 (NESN).

Performance and Risk

So far this year, IQDF has lost about -16.44%, and is down about -14.53% in the last one year (as of 11/25/2022). During this past 52-week period, the fund has traded between $17.72 and $26.19.

The ETF has a beta of 0.82 and standard deviation of 22.19% for the trailing three-year period, making it a medium risk choice in the space. With about 299 holdings, it effectively diversifies company-specific risk.

Alternatives

FlexShares International Quality Dividend ETF is not a suitable option for investors seeking to outperform the World ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.

FlexShares International Quality Dividend Defensive ETF (IQDE) tracks Northern Trust International Quality Dividend Defensive Index and the FlexShares International Quality Dividend Dynamic ETF (IQDY) tracks Northern Trust International Quality Dividend Dynamic Index. FlexShares International Quality Dividend Defensive ETF has $44.41 million in assets, FlexShares International Quality Dividend Dynamic ETF has $65.64 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

FlexShares International Quality Dividend ETF (IQDF): ETF Research Reports

Rogers Corporation (ROG) : Free Stock Analysis Report

Royal Bank Of Canada (RY) : Free Stock Analysis Report

FlexShares International Quality Dividend Dynamic ETF (IQDY): ETF Research Reports

FlexShares International Quality Dividend Defensive ETF (IQDE): ETF Research Reports

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Zacks Investment Research