O’Leary’s O’Shares Tackles Small-Cap Dividends With New ETF
Todd Shriber, ETF Professor, Benzinga Staff Writer
January 11, 2017 9:46am
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 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 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.
Before you invest in O’Shares ETF Investments funds, please refer to the prospectus for important information about the investment objectives, risks, charges and expenses. To obtain a prospectus containing this and other important information, please visit www.oshares.com to view or download a prospectus online. Read the prospectus carefully before you invest. There are risks involved with investing including the possible loss of principal.
Concentration in a particular industry or sector will subject the Funds to loss due to adverse occurrences that may affect that industry or sector. The funds may use derivatives which may involve risks different from, or greater than, those associated with more traditional investments. The funds' emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund's purchase of such a company's securities. Returns on investments in foreign securities could be more volatile than, or trail the returns on, investments in U.S. securities. Exposures to foreign securities entail special risks, including political, diplomatic, economic, foreign market and trading risks. In addition, unless perfectly hedged, the Fund’s investments in securities denominated in other currencies could decline due to changes in local currency relative to the value of the U.S. dollar, which may affect the Fund’s returns. The funds' hedging strategies may not be successful, and even if they are successful, the funds' exposure to foreign currency fluctuations is not expected to be fully hedged at all times. See the prospectus for specific risks regarding the Fund.
The securities of small capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, small capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
Companies involved with the Internet, technology and e-commerce are exposed to risks associated with rapid advances in technology, obsolescence of current products and services, the finite life of patents and the constant threat of global competition and substitutes.
Past performance does not guarantee future results. Shares are bought and sold at market price (not NAV), are not individually redeemable, and owners of the Shares may acquire those Shares from the Funds and tender those shares for redemption to the Funds in Creation Unit aggregations only, consisting of 50,000 Shares. Brokerage commissions will reduce returns. Shares are not individually redeemable and can be redeemed only in Creation Units. The market price of shares can be at, below or above the NAV. Brokerage commissions will reduce returns. Market Price returns are based upon the midpoint of the bid/ask spread at 4:00 PM Eastern time (when NAV is normally determined), and do not represent the returns you would receive if you traded shares at other times.
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