Making its debut on 04/12/2013, smart beta exchange traded fund FlexShares International Quality Dividend ETF (IQDF) provides investors broad exposure to the World ETFs category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

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.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of 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

The fund is managed by Flexshares, and has been able to amass over $642.85 million, which makes it one of the larger ETFs in the World ETFs. Before fees and expenses, this particular fund 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

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.47%, making it one of the cheaper products in the space.

The fund has a 12-month trailing dividend yield of 6.13%.

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, Hsbc Holdings Plc Common Stock Gbp 0.5 (HSBA) accounts for about 3.42% of the fund's total assets, followed by Novartis Ag Common Stock Chf 0.49 (NOVN) and Taiwan Semiconductor Manufacturing Co Ltd Common.

IQDF's top 10 holdings account for about 19.54% of its total assets under management.

Performance and Risk

Year-to-date, the FlexShares International Quality Dividend ETF has added about 9.65% so far, and it's up approximately 11.73% over the last 12 months (as of 03/21/2025). IQDF has traded between $23 and $26.57 in this past 52-week period.

The ETF has a beta of 0.83 and standard deviation of 14.98% for the trailing three-year period, making it a medium risk choice in the space. With about 276 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 Dynamic ETF (IQDY) tracks Northern Trust International Quality Dividend Dynamic Index. The fund has $68.47 million in assets. IQDY has an expense ratio of 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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FlexShares International Quality Dividend ETF (IQDF): ETF Research Reports

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

This article originally published on Zacks Investment Research (zacks.com).

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