Northern Trust FlexShares Debuts 3 New Dividend ETFs

Post on: 29 Март, 2015 No Comment

Northern Trust FlexShares Debuts 3 New Dividend ETFs

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This continues the broad trend in the market towards higher income securities, a situation that has become important thanks to the Fed’s low rate policies. With this backdrop, many investors have begun to look to stocks for income, and international ETFs have taken a good chunk of this attention.

The space is now a bit more crowded thanks to FlexShares’ new ETFs. This is especially true given the use of Northern Trust’s Dividend Quality Score (DQS) in all three of the new products.

This proprietary quantitative method uses fundamental data to assess the strength and quality of a firm’s dividend-paying record and its prospects going forward. The process is based on three main factors; management efficiency and dividend policy, profitability, and cash flow to sustain dividend payments (read 4 Excellent Dividend ETFs for Income and Stability ).

A focus on yield while utilizing this process could be of interest to investors seeking companies that have a great chance to keep paying out strong yields over long time periods. Given this, the new FlexShares funds could be of interest to those seeking plays beyond the U.S. market, and we have highlighted some of the other key points about the trio below:

International Quality Dividend Defensive Index Fund

This ETF looks to track the Northern Trust International Quality Dividend Dynamic Index, charging investors 47 basis points a year in fees. The benchmark seeks to provide exposure to long-term growth stocks in the broad international environment with a focus on yield, using the DQS system.

Additionally, the benchmark will focus on lower beta stocks in order to be more defensive in turbulent times. The target calls for a beta between 0.5 and 1.0 times the Northern Trust International Large Cap Index, so there could be a wide range for this fund’s riskiness level.

The fund looks to be heavily exposed to European markets, with the UK and France in the top five. The exposure looks to be quite diverse overall though, as Japan, Canada, and Australia are also in the top tier.

In terms of sectors, financials account for 28% of assets, a huge percentage compared to other segments. Energy, health care, and telecoms, are the next three biggest, and they combine to account for roughly 30% of the fund.

International Quality Dividend Dynamic Index Fund

IQDY seeks to follow the Northern Trust International Quality Dividend Dynamic Index, charging 47 basis points for this exposure. This product also looks to utilize the DQS system, focusing on ex-US markets for long-term growth potential and dividend income.

This ETF looks to be a bit riskier than its counterpart though, as the beta target will be higher than the parent’s index. So, IQDY intends to have a beta between 1.0 and 1.5 times the Northern Trust International Large Cap Index, while still having a higher income level.

Country exposure is once again tilted towards the UK with this nation accounting for 17.8% of the total. Rounding out the rest of the top five is Japan (11.2%), Australia (8.4%), Germany (7.7%), and China (6.8%).

Sector allocations are focused in on financials, with this sector making up 28.3% of the total. The rest of the top four is a bit different than IQDE though, with industrials, energy, and materials taking up the spots (see Emerging Market Dividend ETFs in Focus ).

Northern Trust FlexShares Debuts 3 New Dividend ETFs

International Quality Dividend Index Fund

This fund looks to track the International Quality Dividend Index, charging investors 47 basis points a year in fees. IQDF looks to be the middle of the road option in terms of beta, seeking to match the beta levels of the parent index.

The parent is once again the Northern Trust International Large Cap Index, so stocks look to be from both developed and international markets. Additionally, the income from IQDF looks to be higher than the parent index, making it a potential income play.

Financials are once again the biggest sector, at just over 28% of assets. This is trailed by energy and industrials, while the two consumer sectors round out the top five.

In terms of nations, British stocks make up roughly 14.6% of assets, followed by Japan and Australia. France and Canada round out the top five, although these make up, respectively, 8.7% and 5.6% of the portfolio.

These new ETFs look to expand on FlexShares’ lineup and give them a bigger foothold in the international market. They could also be interesting picks for investors seeking more income choices in today’s low rate environment.

Holdings look to be relatively similar throughout the trio, though there are a few differences between the sector and national allocation levels. Beyond that though, the different beta targets look to be the biggest change among the group, so this metric should be the focus for investors seeking to choose between the trio for new international dividend ETF exposure.

For those who like this system but preferdomestic stocks, it is worth noting that FlexShares has three such ETFs. These funds, (QDF). (QDEF), and (QDYN), seek to apply the DQS system with a U.S.-focus, and thus could be great complements to the new trio of international funds for income-centric investors.

This article is brought to you courtesy of Eric Dutram  From Zacks .

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