Expanding on its line of quality dividend exchange traded fund strategies, O’Shares has launched a new ETF to help investors track strong developed market companies outside the U.S.
On Wednesday, O’Shares ETF Investments rolled out the O’Shares FTSE Russell International Quality Dividend ETF (NYSEArca: ONTL). ONTL has a 0.48% total expense ratio.
The new international quality dividend ETF will try to reflect the performance of the FTSE Developed ex US Qual/Vol/Yield 5% Capped Factor Index, which is comprised of large- and mid-cap dividend-paying international companies that exhibit high quality, low volatility and high dividend yield factors.
“The quality and low volatility factors are designed to reduce exposure to high dividend equities that have experienced large price declines as may occur with some dividend investing strategies,” according to the ONTL’s prospectus sheet.
High-dividend yielding stocks typically expose investors to greater risk as some may not be able to maintain their high payouts. Consequently, the high quality and low volatility screens may help diminish the risk while still allowing investors to gain exposure to high yields.
The quality factor combines measures of profitability, like return on assets, asset turnover ratio and accruals, with leverage. The low volatility factor uses the standard deviation of five years of weekly local total returns. Lastly, the yield factor is calculated using the company’s twelve month trailing dividend yield.
The combination of factors should help investors gain exposure to companies that generate cash flow and pay dividends, protect investment capital by diversifying and limiting volatility, and invest in quality companies with strong financial performance that could appreciate in value over time.
Company stocks with the smallest product of combined factor scores are removed from the index. Components with higher scores are given greater weights, capped at 5% at each quarterly rebalance.
Current top holdings include Nestle SA 4.8%, Roche Holding 3.9%, Novartis 2.6%, British American Tobacco 2.1% and Sanofi 2.0%.
Sector weights include consumer staples 19.1%, health are 17.7%, materials 7.2%, telecom services 7.0%, financials 8.0%, real estate 7.9%, industrials 11.9%, utilities 7.0%, consumer discretionary 8.4%, information technology 2.3% and energy 2.7%.
For more information on new fund products, visit our new ETFs category.