Should ALPS O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM) Be on Your Investing Radar?

Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the ALPS O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM) is a passively managed exchange traded fund launched on 12/30/2016.

The fund is sponsored by Alps. It has amassed assets over $911.95 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.48%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.06%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 38.40% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Encompass Health Corp. (EHC) accounts for about 2.58% of total assets, followed by Sei Investments Co. (SEIC) and Houlihan Lokey Inc. (HLI).

The top 10 holdings account for about 22.73% of total assets under management.

Performance and Risk

OUSM seeks to match the performance of the FTSE Russell US Qual / Vol / Yield Factor 3% Capped Index before fees and expenses. The OShares U.S. Small-Cap Quality Dividend 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.

The ETF has added roughly 0.05% so far this year and it's up approximately 0.30% in the last one year (as of 07/17/2025). In the past 52-week period, it has traded between $37.73 and $47.20.

The ETF has a beta of 0.95 and standard deviation of 16.52% for the trailing three-year period. With about 111 holdings, it effectively diversifies company-specific risk.

Alternatives

ALPS O'Shares U.S. Small-Cap Quality Dividend ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, OUSM is a sufficient option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 ETF (IWM) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $66.50 billion in assets, iShares Core S&P Small-Cap ETF has $81.21 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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This article originally published on Zacks Investment Research (zacks.com).

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