Small-cap stocks and the related exchange traded funds have recently been earning increased attention thanks to resurgent performances. Some of that has to do with small-caps’ reputation for being solid performers as interest rates rise.
One small-cap dividend ETF is getting a refreshed look, which could potentially reduce its vulnerability to rising interest rates. The O’Shares FTSE Russell Small Cap Quality Dividend ETF (NYSEARCA:OUSM) has a new index.
“Global index provider FTSE Russell recently made some adjustments to the FTSE USA Small Cap 2Qual/Vol/Yield 3% Capped Factor Index, which underlies the O’Shares FTSE Russell US Small Cap Quality Dividend ETF, to help O’Shares address investor concerns around rising interest rates and slowing growth,” said FTSE Russell.
OUSM’s New Look
Smaller companies, which focus on U.S. markets, are less exposed to a stronger U.S. dollar as rates rise, which would more negatively affect larger corporations with a global footprint. Additionally, periods of rising rates also coincide with expanding economies, which often benefit smaller companies.
The $127.61 million OUSM allocates almost 34% of its weight to industrial stocks while the financial services and consumer discretionary sectors combine for 34.70% of the ETF’s weight.