What kind of investment ideas are best positioned for a strong 2025? The stock market remains a hot place to invest, with the S&P 500 wrapping up a firey 2024. While equities still offer strong opportunities and momentum, a quality ETF approach could be a strong option to lead the way into 2025. One such fund, the ALPS O’Shares US Small-Cap Quality ETF (OUSM ), takes a particular approach to quality, via dividends, that could make for a particularly solid option in 2025.
See more: This Small-Cap ETF Beat the Russell 2000 Over the Last 3 Years
OUSM tracks the O’Shares US Small-Cap Quality Dividend Index, charging a 48 basis point fee to do so. The strategy, which launched in 2016, invests in small-cap U.S. equities. In doing so, it takes the S-Network U.S. Equity Mid/Small-Cap 2500 Index and reweights it for exposure to factors including quality, low volatility, dividend yield, and dividend quality. It measures those factors based on metrics like EBITDA, 12-month trailing dividend yield, dividend payout, and more.
Combining quality and dividend screening metrics creates an overall intriguing quality ETF approach for the fund. With its 2% cap on single constituents and 22% cap on sector weights, too, the fund avoids certain dividend fund pitfalls. Dividend-investing strategies can often include many firms that offer strong dividend yields, but otherwise fail to meet quality standards.
By adding dividend screens to a quality ETF approach, OUSM enhances its equity exposure approach while avoiding those pitfalls. With concentration risk and macroeconomic risks looming next year, that could help OUSM set itself apart. The strategy has returned 30.1% over the last year on a NAV basis, per SS&C ALPS Advisors data, beating its benchmark by almost 5% in that time. For 2025, its quality approach could continue to play a potent role.
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VettaFi LLC (“VettaFi”) is the index provider for OUSM, for which it receives an index licensing fee. However, OUSM is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of OUSM.
