Should ALPS O'Shares U.S. Quality Dividend ETF (OUSA) Be on Your Investing Radar?
The ALPS O'Shares U.S. Quality Dividend ETF (OUSA) was launched on 07/14/2015, and is a passively managed exchange traded fund designed to offer broad exposure to the Large Cap Value segment of the US equity market.
The fund is sponsored by Alps. It has amassed assets over $782.87 million, making it one of the average sized ETFs attempting to match the Large Cap Value segment of the US equity market.
Why Large Cap Value
Large cap companies usually have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.48%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.95%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Healthcare sector--about 19.90% of the portfolio. Information Technology and Financials round out the top three.
Looking at individual holdings, Microsoft Corp. (MSFT) accounts for about 5.31% of total assets, followed by Home Depot Inc. (HD) and Merck & Co. Inc. (MRK).
The top 10 holdings account for about 39.68% of total assets under management.
Performance and Risk
OUSA seeks to match the performance of the FTSE US Qual / Vol / Yield Factor 5% Capped Index before fees and expenses. The OShares U.S. Quality Dividend Index measures the performance of publicly-listed large-capitalization and mid-capitalization dividend-paying issuers in the United States.
The ETF has added about 0.31% so far this year and is up roughly 4.44% in the last one year (as of 05/11/2023). In the past 52-week period, it has traded between $38.45 and $42.71.
With about 101 holdings, it effectively diversifies company-specific risk.
Alternatives
ALPS O'Shares U.S. Quality Dividend ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, OUSA is a good option for those seeking exposure to the Style Box - Large Cap Value area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $49.27 billion in assets, Vanguard Value ETF has $100.12 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.
Bottom-Line
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
ALPS O'Shares U.S. Quality Dividend ETF (OUSA): ETF Research Reports
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
The Home Depot, Inc. (HD) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
