ETFs have their ups and downs, and 2023 has proven no exception. While investors expected one market environment entering 2023, instead the S&P 500 has pushed forward behind just a small group of tech names. For investors concerned that rising rates and a top-heavy market may finally take a negative turn next year, it may be worth taking a look at options. A quality dividend ETF can provide meaningful diversification, with one notable strategy doing well YTD seeing some intriguing tech action.
Why look to a quality dividend ETF? All sorts of factors exist in the ETF ecosystem, but dividend and quality screens could play a potent role right now. While large caps are expensive, taking a dividend or quality screen to historically cheap small caps could help identify smaller firms with healthy outlooks. Those screens also benefit strategies that look at larger cap firms, too, but diversifying with some smaller cap strategies via a this kind of ETF could appeal.
(OUSM ), the ALPS O’Shares US Small-Cap Quality Dividend ETF, takes such an approach. It tracks the O’Shares US Small-Cap Quality Dividend Index, charging a 48 basis point (bps) fee. In applying those above factors, it looks at metrics like EBITDA, dividend yield and payout, as well as return on assets. OUSM has returned 5.4% YTD, outperforming both its ETF Database Category and Factset Segment averages.
The Tech Action Behind Quality Dividend ETF OUSM
Such an approach could help investors find smaller firms like Williams-Sonoma (WSM) that might otherwise not make it into their portfolios. While yes, OUSM has seen a performance dip, a Relative Strength Index (RSI) indicator suggests it could bounce back. According to YCharts, OUSM is nearing “oversold” territory, in which the ETF may be seeing “too” much selling momentum compared to its past activity. That, as well as its inherent strategic merits, may be worth tracking OUSM’s returns.
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