Worried about the potential for a near-term market selloff? ETFs can act as helpful tools to toggle exposures and adjust as needed to market risk. While growth has contributed significantly to investors’ portfolios, a focus on quality may now be just what the doctor ordered. As ever, amid the ever-growing sea of ETFs, how does one find the “right” quality strategy? Adding dividends to the mix could be the solution, with quality dividend ETF OUSM perhaps the candidate to watch.
See more: Get Enhanced Equal-Weight ETF Exposure With SDOG
The ALPS O’Shares US Small-Cap Quality Dividend ETF (OUSM ) charges a 48 basis point fee to track the O’Shares US Small-Cap Quality Dividend Index. The ETF looks for small-cap firms weighted for factors including low volatility, high dividend yield, and dividend quality factors.
Specifically, it measures metrics like trailing five-year weekly volatility, EBITDA, and 12-month trailing yield to assess those factors. Finally, the strategy then places at 2% cap on individual stocks and a 22% cap on each sector, when reconstituted.
By measuring quality together with dividends when investing in small-caps, the fund weeds out firms that may flatter to deceive. For example, some smaller firms may provide high dividends but struggle in other important factors. Especially as many investors turn towards smaller firms to look for upside, that discretion can provide a decisive advantage.
Together, this approach has helped the quality dividend ETF return 13.4% over the last one year, per SS&C ALPS Advisors data, as of December 31. That has outperformed the Morningstar U.S. Small-Cap Broad Value Extended Index Total Return in that time, per SS&C ALPS Advisors data, as well. Looking ahead at a market facing red hot valuations and uncertainty, sticking to quality dividend payers could pay off in the medium term. OUSM offers a compelling option therein.
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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.
