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O'Leary's O'Shares Tackles Small-Cap Dividends With New ETF

January 11, 2017 9:46 am
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O'Leary's O'Shares Tackles Small-Cap Dividends With New ETF

Small-cap stocks and dividends have not always been synonymous, but exchange-traded fund providers are giving investors avenues for tapping rising payouts among smaller stocks. The newest entrant to the small-cap dividend ETF field is the O'Shares FTSE Russell Small Cap Quality Dividend ETF (NYSE: OUSM).

The OUSM, which debuted this week, is the latest ETF from O'Shares Investments, the ETF issuer founded by “Shark Tank” star Kevin O'Leary. OUSM tracks the FTSE US Small Cap Qual / Vol / Yield Factor 3% Capped Index.

The ETF And Its Index

That index “is designed to reflect the performance of publicly-listed small-capitalization dividend-paying issuers in the United States exhibiting high quality, low volatility and high dividend yields, as determined by FTSE-Russell. The quality and low volatility factors are designed to reduce exposure to high dividend equities that have experienced large price declines, as may occur with some dividend investing strategies,” according to O'Shares.

Investors typically prize small caps for growth prospects, not payouts, but historical data indicate adding dividends to the small-cap equation can reduce volatility while potentially boosting long-term total returns.

Real estate and consumer discretionary stocks combine for over 35 percent of OUSM's weight. Industrial, financial services and technology names combine for another 39 percent of the new ETF's weight.

Small-Cap Investing And Quality

O'Leary highlighted the advantages of investing in small-caps while emphasizing the need to focus on quality.

“Most people don't realize that $1,000 invested in U.S small caps 15 years ago would potentially been worth $3,385 today, compared to only $2,642 for U.S. large caps and now, with a strong U.S. dollar and the potential for reduced regulation to boost the U.S. economy, I have more reasons to own small caps,” said O'Leary in a statement. “The thing is, because I am a conservative long-term investor I want less risk and want to own U.S. small caps that have been carefully selected to avoid the risky stocks and only select stocks that meet our metrics for quality, including less leverage and strong return on assets. That's exactly how the O'Shares ETF OUSM was built.”

OUSM expands the O'Shares lineup of quality dividend ETFs, which includes the popular O'Shares FTSE U.S. Quality Dividend ETF (NYSE: OUSA). OUSA has needed just a year and a half on the market to garner nearly $360 million in assets under management.

OUSM charges 0.48 percent per year, or $48 on a $10,000 investment.

Image Credit: Provided by and used with expressed permission from Kevin O’Leary’s office.

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