A Solid Fund for Investors Seeking Dividend Yield
Bronze-rated FlexShares Quality Dividend is off to a strong start, but we'd like to see how it performs during a market downturn.
Adam McCullough: Bronze-rated FlexShares Quality Dividend is a solid fund for investors seeking dividend yield. Investors can benefit from owning dividend-paying stocks, but chasing yield can be dangerous. For example, the highest-yielding stocks may be under financial distress and more likely to cut their dividends than their lower-yielding counterparts. Many of these stocks pay out a large share of their earnings as dividends, leaving a small a buffer to cushion these payments if their business deteriorates.
This fund strives to sidestep this risk by balancing profitability and yield. If a stock is more profitable, it should be able to maintain its dividend during a market downtown or raise its payout ratio in the future. Although this fund's profitability tilt helps it avoid the riskier, highest-yielding stocks, its yield has consistently topped the category average by 30%.
Adam McCullough does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.