FlexShares Lists Dividend-Focused ETFs

April 16, 2013

The latest rollout looks to tap into the growing segment of dividend-paying equities strategies.

FlexShares, the ETF unit of Chicago-based bank Northern Trust, today is launching three dividend-focused equities funds, all of which the company is looking to self-index.

The income-oriented portfolios, each tracking a member of the Northern Trust Quality Dividend index family, are each long-only equities baskets that pick securities based on expected dividend payments and fundamental factors such as profitability, solid management and reliable cash flow, the company said on its website. They include:

  • The FlexShares International Quality Dividend Index Fund (NYSEArca: IQDF)
  • The FlexShares International Quality Dividend Defensive Index Fund (NYSEArca: IQDE)
  • The FlexShares International Quality Dividend Dynamic Index Fund (NYSEArca: IQDY)

They are all designed to provide exposure to long-term growth potential of international securities and deliver dividend income, the company said on its website. IQDF, IQDE and IQDY each cost a net of 0.47 percent in expense ratio.

The nomenclature of the funds speaks to targeted volatility, with the “Quality Dividend” name indicating that volatility of the funds’ holdings will be in line with the index. “Dynamic” and “Defensive” meanwhile suggest that volatility will be above and below each respective index.

The launches are timely given that investors continue to pour assets into dividend-focused strategies as they look for income alternatives at a time of paltry yields on traditional fixed-income instruments such as government bonds. Inflows into payout-rich ETFs have easily topped $60 billion in the past year, according to data compiled by IndexUniverse.

The funds will join three similar strategies, albeit U.S.-focused, the company launched back in December.

Both IQDF and IQDE allocate just over half of their portfolios to large-cap names, with the U.K., Japan and Australia their largest single-country allocations, respectively. The funds are nearly 30 percent tied to financials, with 11 percent linked to energy stocks.

IQDY, meanwhile, has 60 percent of the portfolio allocated to large-cap names, and while financials represent nearly 30 percent of the mix as well, industrials are the second largest sector allocation at 13.8 percent of the portfolio.

Northern Trust’s ETF unit has $4.69 billion in assets under management, making it the 16th-largest U.S. ETF provider today.


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