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A Shark Of An ETF In The Dividend ETF Tank

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A Shark Of An ETF In The Dividend ETF Tank
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Approximately 200 exchange-traded products came to market in the United States in 2015. Many are still trying to catch investors' eyes and assets. A far smaller amount is thriving, making residents of that category particularly notable. That category includes the O’Shares FTSE U.S. Quality Dividend ETF (NYSE: OUSA).

When OUSA debuted last year, the most notable thing about the ETF was that it was one of the first ETFs from “Shark Tank” personality Kevin O’Leary's O'Shares Investments. Fortunately, OUSA has earned its stripes in terms of performance, ensuring that regardless of O'Leary's fame, this is a solid ETF for dividend investors.

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Last Friday, OUSA celebrated its first anniversary in style as one of a small number of U.S. ETFs to hit all-time highs. Speaking of style, OUSA is home to nearly $255 million in assets under management, according to O'Shares data, making it one of the most successful ETFs to come to market last year. 

And What A Year It's Been

OUSA follows the FTSE US Qual/Vol/Yield Factor 5% Capped Index, which “is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization dividend-paying issuers in the United States that meet certain requirements for market capitalization, liquidity, high quality, low volatility and dividend yield, as determined by FTSE-Russell,” according to O'Shares.

At its core, OUSA is a dual factor ETF, emphasizing the low volatility and quality factors. Combining those factors often leads to a dividend outcome and those are two of this year's best-performing factors.

The primary objective of low volatility ETFs is to be, well, less volatile than rival strategies and provide investors with some downside protection. OUSA is certainly delivering on its low volatility promise. From August 2015 through May 2016, the O'Shares ETF was only more volatile on a monthly basis than the S&P 500 one time: October 2015.

OUSA's underlying index sports a dividend yield of almost 3.2 percent, impressive considering that high-yielding utilities are one of the ETF's smallest sector weights at just 6.7 percent. Consumer staples and healthcare names combine for a third of OUSA's weight. Dow components Johnson & Johnson (NYSE: JNJ) and Exxon Mobil Corporation (NYSE: XOM) combine for 10.6 percent of OUSA's and are the ETF's two largest holdings.

The track record is short, but OUSA is off to a good start against some more seasoned competitors. For example, OUSA's gain of 15 percent since coming to market is nearly double that of the Vanguard Dividend Appreciation ETF (NYSE: VIG), the largest U.S. dividend ETF, over the same period. Plus, OUSA has been 80 basis points less volatile than VIG.

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Disclosure: Todd Shriber owns shares of JNJ.

Posted-In: dividend ETFs Kevin O'LearyLong Ideas Broad U.S. Equity ETFs Dividends Top Stories Trading Ideas ETFs Best of Benzinga

 

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