Research Report:

Dividend Watch: Equity Income Trends and Strategies

O’Shares U.S. Quality Dividend ETF (OUSA)

O’Shares U.S. Quality Dividend ETF (OUSA)

Seeks companies with strong profitability, balance sheets and dividend growth which may reduce risk of dividend yield traps while providing a growing source of income.

Quality Dividends for Income Growth and Stability?

Quality Dividends for Income Growth and Stability?

We believe companies with strong dividend growth and coverage have an increased likelihood that they will be able to maintain and grow dividends paid to investors even during periods of economic duress.

The Power of Dividend Investing

The Power of Dividend Investing

Dividends are payments that companies make to shareholders at regular intervals, usually quarterly. Dividends and compounding are a strong force in generating investor returns and growing income.

Quality with strong performance with less risk

Quality with strong performance with less risk

Quality may be defined as companies with stronger profitability and balance sheets, those exhibiting higher return on assets and lower leverage.

Balance Sheet Strength, A Clue in Finding Stronger Stock Performance

Leverage is a measure of how much debt a company employs in their capital structure. Responsible use of debt can help companies grow while an overly heavy debt burden may lead to deteriorating financial health and performance. Using Net Debt to EBITDA (Earnings Before Interest Taxes Depreciation and Amortizations), companies with a lower ratio would have lower leverage, while companies with a higher ratio are less likely to be able to handle their debt burden.

The relationship between lower leverage and stronger performance tends to persist in most sectors. The companies with lower leverage in all 11 S&P 500 sectors generated higher 5 year annualized returns on average than those with higher leverage.

Companies with lower leverage tend to outperform by approximately 8% on average compared to those with higher leverage.

Source: Bloomberg Finance L.P., data as of 01/31/2022.
Higher Leverage: Defined as companies with a Net Debt to EBITDA Ratio that are in the top half of their sector.
Lower Leverage: Defined as companies with a Net Debt to EBITDA Ratio that are in the bottom half of their sector.
CFO to Debt: Trailing 12 Month Cash From Operations / Short- & Long-Term Borrowings.
For Indices and Financial Definitions, please visit our Glossary page. Past performance does not guarantee future results. The referenced index is shown for general market comparisons and is not meant to represent the O’Shares Funds. Investors cannot directly invest in an index.

 
 
 
 
 
 
 
 
 
 

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Dividend growth has generated income growth

Investors looking to boost the income generated by their portfolio may want to consider high quality dividend paying stocks. Profitable dividend paying companies have the ability to maintain and even grow dividend payments to their investors. This is demonstrated by the growth in dividends per share paid by the companies in the S&P 500. From 2010 through 2020 the dividends per share paid by the companies in the S&P 500 have more than doubled, a growth rate of nearly 9% per year.

Source: Bloomberg Finance L.P., data as of 12/31/2021.
For Indices and Financial Definitions, please visit our Glossary page.
S&P 500 Dividends: Gross amount of all dividends that have gone EX in the last 12 months, including special cash dividends. Calculated by summing all members Dividends Per Share 12 Months (Gross) times shares in the index, divided by the index divisor. Past performance does not guarantee future results. The referenced index is shown for general market comparisons and is not meant to represent the O’Shares Funds. Investors cannot directly invest in an index.

The Most Powerful Force in the Universe?

Albert Einstein once stated, “Compound interest is the most powerful force in the universe.” This theory is highlighted by the contribution from dividends and compounding to the long-term performance of the S&P 500.

The S&P 500 is widely regarded as one of the best gauges for the large-cap U.S. stock market. Dating back to the start of 1957, the price return of the S&P 500 is over 9000%. The total return which includes the impact of dividends and compounding is over 60000%. Approximately 80% of the hypothetical total return that an investor would have earned over this long period is attributable to dividends and compounding.

“Compound interest is the most powerful force in the universe.” – Albert Einstein
Over 80% of S&P 500 total returns come from dividends and compounded returns.

Source: Bloomberg Finance L.P. data as of 01/31/2021. Quote: QuotesOnFinance.com
For Indices and Financial Definitions, please visit our Glossary page.
Past performance does not guarantee future results. The referenced index is shown for general market comparisons and is not meant to represent the O’Shares Funds. Investors cannot directly invest in an index.

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