Some exchange traded funds focus on companies that are prodigious generators of free cash and Pacer ETFs is one of the leading issuers on that front. Late last year, the issuer launched the Pacer US Cash Cows 100 ETF (BATS: COWZ).
COWZ tries to reflect the performance of the Pacer US Cash Cows 100 Index, which is comprised of large- and mid-cap U.S. companies with high free cash flow yields, or those commonly referred to as “cash cows.”
The underlying index selects companies from the Russell 1000 Index and screens those based on average projected free cash flows and earnings over each of the next two fiscal years, excluding financial companies other than real estate investment trusts.
Dividend investors should note COWZ and its stablemates focus “on free cash flow yields, it will not generate the highest distributions. What the fund shows us is that the healthiest companies are not necessarily the ones that pay the highest dividends,” according to a Seeking Alpha analysis of COWZ.