Back to top

Image: Bigstock

Should ALPS O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM) Be on Your Investing Radar?

Read MoreHide Full Article

The ALPS O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM - Free Report) was launched on 12/30/2016, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Blend segment of the US equity market.

The fund is sponsored by Alps. It has amassed assets over $332.38 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.48%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.16%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 27.70% of the portfolio. Financials and Information Technology round out the top three.

Looking at individual holdings, Lincoln Electric Holdings Inc. (LECO - Free Report) accounts for about 2.64% of total assets, followed by Watsco Inc. (WSO - Free Report) and Encompass Health Corp. (EHC - Free Report) .

The top 10 holdings account for about 23.35% of total assets under management.

Performance and Risk

OUSM seeks to match the performance of the FTSE Russell US Qual / Vol / Yield Factor 3% Capped Index before fees and expenses. The OShares U.S. Small-Cap Quality Dividend Index is designed to reflect the performance of publicly-listed small-capitalization dividend-paying issuers in the United States exhibiting high quality, low volatility and high dividend yields.

The ETF has added about 7.67% so far this year and is up about 7.35% in the last one year (as of 08/25/2023). In the past 52-week period, it has traded between $29.99 and $37.73.

The ETF has a beta of 1.09 and standard deviation of 17.34% for the trailing three-year period. With about 117 holdings, it effectively diversifies company-specific risk.

Alternatives

ALPS O'Shares U.S. Small-Cap Quality Dividend ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, OUSM is an excellent option for investors seeking exposure to the Style Box - Small Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 2000 ETF (IWM - Free Report) and the iShares Core S&P Small-Cap ETF (IJR - Free Report) track a similar index. While iShares Russell 2000 ETF has $53.40 billion in assets, iShares Core S&P Small-Cap ETF has $69.01 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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.

Published in