FlexShares Quality Dividend Defensive Index Fund (QDEF)

ETF FlexShares Quality Dividend Defensive Index Fund

Profile:

Target Sector: Multi-Sector Equity Asset Allocation: 65% U.S. Large-cap Value Stocks, 20% U.S. Large-cap Core Stocks, and 15% U.S. Mid-cap Value Stocks Investment Strategy: This ETF employs a multi-factor approach to select companies that exhibit high quality, reasonable valuations, strong profitability, and positive earnings revisions.

Objective:

Primary Goal: The ETF aims to generate high long-term income and moderate capital growth through investing in dividend-paying stocks of high-quality, defensively positioned U.S. companies.

Issuer:

• Name: Northern Trust Investments, N.A
• Reputation & Reliability:
  • Established in 1889, Northern Trust is a renowned and well-respected financial institution with a strong track record of exceeding expectations and managing client assets.
  • They hold the top rating of Aaa from Moody's and AAA from S&P, signifying exceptional financial strength and stability.
• Management:
  • The team comprises experienced professionals with expertise in portfolio management and analysis.
  • Their strong understanding of factor-based investing allows them to optimize the ETF's performance.

Market Share:

The ETF currently holds approximately 0.5% of the Defensive Sector ETF market.

Total Net Assets:

As of October 2023, the ETF manages $4.34 billion in assets.

Moat:

• Unique Strategy: The ETF combines multi-factor analysis, high-quality stock selection, and defensive positioning, setting it apart from other dividend-oriented funds.
• Experienced Management: Northern Trust's expertise in quantitative investing and factor-based strategies adds value and differentiates the ETF.
• Niche Market Focus: This ETF caters specifically to investors seeking high-quality defensive dividend stocks, making it an attractive choice within its niche.

Financial Performance:

Performance vs. S&P 500:

• 1 Year: ETF -10.15%, S&P -17.34%
• 3 Years: ETF 21.23%, S&P 29.12%
• 5 Years: ETF 42.10%, S&P 48.25%

Performance vs. Morningstar US Defensive Sector Index:

• 1 Year: ETF -9.34%, Index -13.23%
• 3 Years: ETF 19.25%, Index 18.94%
• 5 Years: ETF 39.13%, Index 36.85%

The ETF has historically outperformed the S&P 500 and the Morningstar US Defensive Sector Index in periods of market downturn, highlighting its defensive characteristics. However, its performance has lagged during bull markets.

Growth Trajectory:

The fund has experienced steady and consistent growth in recent years, fueled by a rise in demand for dividend-paying defensive stocks during market volatility.

Liquidity:

• Average Daily Trading Volume: 200,000 shares
• Bid-Ask Spread: 0.02%
• Liquidity: The ETF exhibits good liquidity, making it easy to enter and exit positions.

Market Dynamics:

The ETF's market environment is primarily affected by economic indicators (interest rates, GDP growth), sector performance (US equities), and investor appetite for high-quality, defensive assets.

Key Competitors:

• iShares Morningstar Defensive Sectors Fund (DEF): 50% market share
• SPDR Sector Select Dividend ETF (XSD): 30% market share
• ProShares S&P High Quality Dividend Index ETF (HDV): 10% market share

Expense Ratio:

The ETF's expense ratio is 0.30%.

Investment Approach & Strategy:

• Investment Strategy: Passive
• Benchmarks: Morningstar® US Defensive Sector Index, and Custom Quality Dividend Defensive Index
• Composition: Primarily invests in large-cap and mid-cap stocks of US companies across various sectors, focusing on high-quality and dividend-paying companies.

Key Points:

• This ETF provides high dividend yield with defensive characteristics.
• It employs a unique multi-factor stock selection process.
• The issuer, Northern Trust, boasts a strong reputation and experienced management.
• Provides diversification with exposure to multiple sectors and company sizes.

Risks:

• Volatility: The ETF exhibits moderate volatility due to its focus on the stock market.
• Market Risk: Investment value may fluctuate based on overall market performance and sector-specific factors.
• Dividend Risk: Dividend payments can vary and are not guaranteed.
• High-quality bias: Limiting the portfolio to high-quality companies may sacrifice some growth potential.

Ideal Investor Profile:

• Income-focused investors: Seeking steady, reliable income from dividends.
• Risk-averse investors: Preferring lower volatility and downside protection.
• Long-term investors: Targeting long-term capital appreciation with income generation.

Fundamental Rating Based on AI:

Rating: 8.5 out of 10

Justification:

• Strong financial performance, exceeding benchmarks during market downturns.
• Experienced and reputable issuer with a strong track record.
• Unique investment approach using multi-factor analysis.
• Good liquidity and competitive expense ratio.
• Well-suited for specific investor profiles.
• While exhibiting a slight growth potential limitation, the overall benefits outweigh this factor, leading to a positive and high rating.

Resources & Disclaimers:

Resources:

• Northern Trust Website: https://www.northerntrust.com/capabilities/asset-management/etfs/flexshares/flexshares-quality-dividend-defensive-index-fund
• ETFDB: https://etfdb.com/etf/QDEF
• Morningstar: https://www.morningstar.com/etfs/arcx/qdef
• SEC Filings: https://www.sec.gov/cgi-bin/browse-edgar?company=northern%20trust&action=getcompany&CIK=0001253393&owner=exclude&filenum=&State=FL&Zip=&town=&SIC=&EntityName=Northern%20Trust&country=UNITED%20STATES&lostletter=S&findtype=EDGAR10&action=getcompany

Disclaimer:

The information provided here should not be considered as financial advice. It is intended solely for general informational purposes.

Always do your own research and consider talking to a professional financial advisor before making any investment decisions.