Dividend stocks took a backseat to growth counterparts over the past several years. But there are expectations of declining interest rates and payout growth. So there’s still a compelling case for equity income, particularly among investors with long time horizons.
Factor in the possibility that 2025 could bring an uptick in volatility for stocks if the Trump administration pursues trade tariffs and it becomes clear that high quality and low volatility are factors that could work well for investors. Enter the ALPS O’Shares U.S. Quality Dividend ETF (OUSA ). Home to nearly $804 million in ASUM, the fund turns 10 years old in July. It follows the O’Shares U.S. Quality Dividend Index.
The ETF’s methodology focuses more on current and future dividend prospects than yield. That delivers a higher quality lineup to investors. While dividend investing often features deep intersections with the value style, OUSA deserves some credit on that front. That’s because in 2024, the ETF beat the S&P 500 Value Index by 500 basis points. More of the same could be in store this year due to the fund’s attractive roster payout names.
Dividend ETF OUSA Could Be Ideal 2025 Income Play
At the sector level, OUSA is diverse, with six sectors commanding double-digit allocations. The ETF’s 15.40% weight to healthcare stocks could be a plus in 2025 as that group attempts to shed its laggard status. Despite trailing the broader market last year, healthcare is home to some of the most dependable dividend growth names,. These include Johnson & Johnson JNJ, Medtronic MDT and Merck MRK, all of which are OUSA holdings.
“Patents, economies of scale, and a powerful intellectual base buoy Merck’s business and keep it well shielded from the competition,” said Morningstar director Karen Andersen.
To its credit, OUSA has a 23.17% weight to technology stocks. And it was quick to add new dividend payer Alphabet (GOOGL). Combine the Google parent with Apple (AAPL) and Microsoft (MSFT), and those three names account for about 15% of the ETF’s portfolio. That’s solid compared to other dividend ETFs. And it confirms OUSA has multiple outlets for future payout growth.
Of course, OUSA also has leverage to more traditional dividend sectors, including consumer staples. Some of the top dividend names in that group include General Mills (GIS) and PepsiCo (PEP), both of which are OUSA components.
“General Mills rounds out our list of the best dividend stocks to buy. With a portfolio of brands that includes Nature Value, Cheerios, Yoplait, and Pillsbury, among others, we think the firm has carved out a narrow economic moat. Slowing consumer spending has hurt recent results and will likely continue to do so into 2025, but we expect General Mills’ brands to deliver in the long run,” noted Morningstar’s Susan Dziubinski.
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