The ALPS O’Shares U.S. Quality Dividend ETF (OUSA) was launched on 07/14/2015, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box – Large Cap Value category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
If you’re the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $760.88 million, this makes it one of the average sized ETFs in the Style Box – Large Cap Value. OUSA is managed by Alps. Before fees and expenses, this particular fund seeks to match the performance of the FTSE US Qual / Vol / Yield Factor 5% Capped Index.
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.
Cost & Other Expenses
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for OUSA are 0.48%, which makes it on par with most peer products in the space.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it’s still important for investors to research a fund’s holdings.
This ETF has heaviest allocation in the Healthcare sector – about 23.10% of the portfolio. Information Technology and Financials round out the top three.
Taking into account individual holdings, Johnson & Johnson (JNJ) accounts for about 5.84% of the fund’s total assets, followed by Procter & Gamble Co. (PG) and Verizon Communications Inc. (VZ).
OUSA’s top 10 holdings account for about 40.03% of its total assets under management.
Performance and Risk
The ETF has lost about -16.44% and is down about -4.26% so far this year and in the past one year (as of 12/20/2022), respectively. OUSA has traded between $38.45 and $46.65 during this last 52-week period.
With about 100 holdings, it effectively diversifies company-specific risk.
Alternatives
ALPS O’Shares U.S. Quality Dividend ETF is a reasonable option for investors seeking to outperform the Style Box – Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $52.87 billion in assets, Vanguard Value ETF has $97.08 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box – Large Cap Value.
Bottom Line
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
.
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