Is FlexShares Quality Dividend Defensive ETF (QDEF) a Strong ETF Right Now?

The FlexShares Quality Dividend Defensive ETF (QDEF) made its debut on 12/14/2012, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Blend 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.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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. QDEF has been able to amass assets over $411.50 million, making it one of the average sized ETFs in the Style Box - All Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the Northern Trust Quality Dividend Defensive Index.

The Northern Trust Quality Dividend Defensive Index is designed to provide exposure to a high-quality income-oriented portfolio of long-only U.S. equity securities, with an emphasis on long-term capital growth and a targeted overall beta that is generally between 0.5 to 1.0 times that of the Northern Trust 1250 Index that are selected based on expected dividend payment and fundamental factors.

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.

Operating expenses on an annual basis are 0.37% for this ETF, which makes it on par with most peer products in the space.

QDEF's 12-month trailing dividend yield is 1.88%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

QDEF's heaviest allocation is in the Information Technology sector, which is about 26.30% of the portfolio. Its Healthcare and Financials round out the top three.

When you look at individual holdings, Apple Inc Common Stock Usd 0.00001 (AAPL) accounts for about 7.26% of the fund's total assets, followed by Nvidia Corp Common Stock Usd 0.001 (NVDA) and Microsoft Corp Common Stock Usd 0.00000625 (MSFT).

The top 10 holdings account for about 35.3% of total assets under management.

Performance and Risk

The ETF has added roughly 1.28% so far this year and it's up approximately 13.43% in the last one year (as of 05/13/2025). In the past 52-week period, it has traded between $62.50 and $73.73.

The ETF has a beta of 0.85 and standard deviation of 14.61% for the trailing three-year period, making it a medium risk choice in the space. With about 127 holdings, it effectively diversifies company-specific risk.

Alternatives

FlexShares Quality Dividend Defensive ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $66.46 billion in assets, Vanguard Total Stock Market ETF has $465.38 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Blend.

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

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