Looking out for dividends? With the potential for future volatility only rising, it may be prudent to consider. Dividends, especially in a small cap format, combine upside with current income-related portfolio durability. That interest has already helped drive flows into small-cap dividends ETFs like the ALPS O’Shares US Small-Cap Quality Dividend ETF (OUSM). OUSM has hit a recent milestone of $300 million in AUM, bolstering its case with solid liquidity.
OUSM hit $300 million in AUM within the last week, largely thanks to new inflows. The ETF added $38.2 million over the last five days alone, totaling $70.8 million over the last month. That may attract investors and advisors to revisit the strategy, especially given that it has been sending tech signals for weeks. The ETF’s price has sat above both its 50-day and 200-day simple moving averages (SMAs) for much of June.
Why dividends right now? CBOE’s VIX volatility measure is sitting at a very low level right now, indicating limited volatility, but that won’t last forever. Now might be the right time to pad a portfolio with dividend income, especially when combined with small-caps. Dividend-focused small-caps offer less risk than other small-caps thanks to dividends’ ability to indicate firms’ health. OUSM itself offers a 2% annual dividend yield right now.
See more: “2 Quality Small Caps to Watch in OUSM”
OUSM tracks an index of U.S. small-cap stocks weighted by exposure to quality, low volatility, high dividend yield, and other factors. The small-cap dividends ETF expects to hold the 200 names with the highest overall scores. Each holding takes on a 2% cap with a 22% cap for each sector.
Together, that’s contributed to 7% returns YTD, outperforming both its ETF Database category average and its FactSet segment average. Charging 48 basis points, OUSM’s new milestone presents an opportunity for investors to jump in and embrace the dividends.
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