Market Overview

A Steady Dividend ETF From O'Shares

A Steady Dividend ETF From O'Shares

Weakness in the FAANG stocks and other growth and momentum names has some market observers opining about a rotation to value stocks, a group that has achieved laggard status in recent years.

Some evidence suggests that a rotation to value may be warranted. This month, the S&P 500 Value Index is up nearly 1 percent while the S&P 500 is lower by nearly the same amount.

What Happened

Investors focusing on a possible resurgence by value stocks may be missing out on opportunities with quality and dividend stocks such as those featured in the O’Shares FTSE U.S. Quality Dividend ETF (NYSE: OUSA).

OUSA, which is up 1.55 percent this month, tracks the FTSE USA Qual/Vol/Yield 5% Capped Factor Index.

OUSA's underlying benchmark “is designed to measure the performance of publicly-listed large-capitalization and mid-capitalization dividend-paying issuers in the United States that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds,” according to O'Shares.

Why It's Important

Some single factor strategies like low volatility lack the ability to capture all of the upside in bull markets, but offer downside protection when stocks swoon. OUSA captured most of the market's upside while harnessing just 64 percent of the downside, while the S&P 500 Value Index had a downside capture of nearly 100 percent, according to O'Shares data.

OUSA has relatively light exposure to some of the sectors that dominate value strategies. For example, the fund devotes about 18 percent of its combined weight to the troubled energy and financial services sectors. The ETF allocates about a quarter of its weight to the consumer discretionary and technology sectors, groups that are hallmarks of growth strategies. 

Still, OUSA offers defensive positioning, as highlighted by a combined weight of over 31 percent to the consumer staples and health care sectors.

What's Next

Over the past year, OUSA has outperformed the S&P 500 Value Index with lower volatility. OUSA's trailing 12-month dividend yield of 3.08 percent is also higher than that of the S&P 500 Value Index.

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


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