The O’Shares FTSE US Quality Dividend ETF (NYSEArca: OUSA) was one of the first exchange traded funds brought to market by O’Shares Investments, the ETF issuer founded by “Shark Tank” personality Kevin O’Leary.
To its credit, OUSA has rapidly established a following among dividend investors in less than two years on the market. The O’Shares FTSE US Quality Dividend ETF cements O’Leary’s dividend commitment.
OUSA tracks the FTSE US Qual / Vol / Yield Factor Index, an expansion of FTSE Russell’s FTSE Global Factor Index Series. The index seizes on three prominent themes in the ETF community: Dividends along with the low volatility and quality factors.
Component holdings have stable cashflow to pay dividends, are diversified across 10 sectors to limit volatility and invest in quality companies with strong financial performances that may have a higher chance of appreciating over time.
The quality factor “attempts to capture companies that demonstrate healthy balance sheets and strong cash flows and avoid companies that are unprofitable or have high levels of debt on the balance sheet. This factor is a composite that considers variables such as profitability, efficiency and earnings quality,” according to Seeking Alpha.
OUSA, which has $382.4 million in assets under management and a trailing 12-month dividend yield of 2.4%, allocates over 18% of its weight to consumer staples names. The technology and healthcare sectors combine for about 30% of the ETF’s weight. Conversely, the ETF is lightly allocated to sectors that have seen negative dividend action in recent years as the energy and materials sectors combine for less than 5% of the fund’s weight.
Dividend growers provide an aspect of quality and growth since these firms have a long track record of raising dividends. Companies that have consistently raised dividends also exhibit stable balance sheets and consistent earnings growth.
The low volatility factor “favors companies that exhibit a historically lower risk profile (as measured by the five-year weekly standard deviation of returns) on the belief that these companies will outperform their higher risk counterparts over time,” notes Seeking Alpha.
OUSA is up 6.1% year-to-date and 10% over the past year.
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