With multiple rate cuts now in the books for this Fall, and more potentially on the horizon, investors may be looking for responsive ETFs. Small caps have stood out therein, given how much more debt costs impact smaller firms. Rate cuts, then, could lift those companies and help them push forward in a brighter overall economic environment. Identifying the right small-cap ETF, then, appears as a key goal for many equities investors, with OUSM presenting one very appealing option.
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OUSM, the ALPS O’Shares US Small-Cap Quality Dividend ETF tracks the O’Shares U.S. Small-Cap Quality Dividend Index. Charging a 48 basis point fee, the strategy’s index invests in small cap stocks weighted for quality, low volatility, and dividend quality factors. The small cap ETF looks to hold 200 stocks. It scrutinizes its initial universe, applying metrics like ROA, trailing five-year weekly volatility, and dividend yield. Finally, it caps individual holdings at 2% with a 22% sector cap, which limits overexposure to traditional dividend-heavy areas like utilities.
OUSM’s Small-Cap ETF Approach
Together, that approach can help the small-cap ETF beat its rivals. Where your standard small-cap ETF will track a broad small-cap index, OUSM’s emphasis on quality and dividends can outperform. Dividends don’t just offer current income. They also point to the overall health of a firm and how positive its internal outlook is. That, combined with a quality screen, can help identify those smaller companies poised to get the most out of cheaper debt costs.
OUSM has returned 16% YTD and 30% over one year per SS&C ALPS Advisors annualized data. Those returns beat the Morningstar U.S. Small-Cap Broad Value Extended Index over both time frames. Those returns also beat the fund’s ETF Database Category and FactSet Segment averages YTD and over one year. For those looking for a small cap ETF, OUSM stands out as a category leader to watch.
VettaFi LLC (“VettaFi”) is the index provider for OUSM, for which it receives an index licensing fee. However, OUSM is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of OUSM.
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