QDF - QDF: Quality-Heavy Dividend ETF Does Not Impress On Performance Yield Fronts
2024-05-13 11:54:04 ET
Summary
- QDF is a passively managed vehicle that targets U.S. dividend stocks with robust quality, with the key parameters assessed being management efficiency, profitability, and cash flows.
- After two reconstitutions since my previous note, QDF still delivers exemplary quality, with a fairly expensive valuation as the downside. Also, there is a nuanced improvement on the growth front.
- I remain lukewarm about QDF despite its improved growth profile, mostly because its performance is still unconvincing. Its 2.3% weighted-average dividend yield does not appeal to me as well.
Dividend investing will never go out of fashion, with the reason for that being an enormous cohort of investors who prefer cold, hard cash over capital gains that are fickle in nature. A severe blow to the market might erase them rapidly, with the risk that they will never be restored, but stable, durable, and predictable dividends are immune to it. Sometimes, they are even immune to recessions or a few of them. However, it goes without saying that not all dividend strategies are created equal. Some are much more selective, chasing the most resilient and promising stories. One of the examples is the FlexShares Quality Dividend Index Fund ETF ( QDF ), an investment vehicle I am providing an update on today. QDF pursues top-quality U.S. dividend stories, focusing on management efficiency, profitability, and cash flows. Does its approach stand out? Though it has a few advantages, alas, this is an underperforming strategy that delivered an unsatisfying downside capture ratio in the past, unable to beat either the iShares Core S&P 500 ETF ( IVV ) or the iShares Russell 1000 ETF ( IWB ). Unfortunately, its modest dividend yield did not compensate for soft price performance....
QDF: Quality-Heavy Dividend ETF Does Not Impress On Performance, Yield Fronts