Even as a risk-off sentiment emerged in July, interest in U.S. equity ETFs offering attractive dividends surged during the month.
The ALPS O’Shares U.S. Quality Dividend ETF (OUSA) is an ideal fit for investors looking for a core investment holding that provides cost-efficient access to a portfolio of large-cap and mid-cap high-quality, low-volatility, dividend-paying companies in the U.S.
The fund brings a factor-based, high dividend yield approach to the large-cap U.S. equities. The fund tracks the O’Shares U.S. Quality Dividend Index, whose constituents are selected from the S-Network US Equity Large-Cap 500 Index, which is a compilation of the 500 largest stocks of publicly listed companies within the U.S., according to VettaFi. All stocks included in the S-Network US Equity Large-Cap 500 Index are screened for free-float and average daily trading volume.
Multiple metrics within each factor are averaged to develop an overall ranking score for each security. Securities are weighted based on a score-modified market-cap, with the top 100 highest-weighted companies being selected for the portfolio. The fund attempts to capture higher yield while mitigating holding risks, according to VettaFi. OUSA places a 5% cap at each quarterly rebalance on each security and applies a sector weight cap of 22% during annual reconstitution.
The fund’s top holdings as of August 5 include Johnson & Johnson (JNJ, 5.35% weight), Procter & Gamble Company (PG, 4.88% weight), Microsoft Corporation (MSFT, 4.54% weight), Home Depot Inc. (HD, 4.02%), and Verizon communications Inc. (3.90% weight), according to VettaFi.
Consumer non-cyclical stocks make up 40.50% of the portfolio, followed by technology at 15.50%, and industrial at 15.34%, according to ALPS. Consumer cyclical (13.93%), communications (8.16%), and financial (6.45%) round out the bottom three.
The fund has a dividend yield of 2.03% as of August 5, according to ALPS, the fund advisor.
The fund has $757 million in assets under management and charges a 48 basis point expense ratio.
vettafi.com is owned by VettaFi, which also owns the S-Network US Equity Large-Cap 500 Index. VettaFi is not the sponsor of OUSA, but VettaFi’s affiliate receives an index licensing fee from the ETF sponsor.