The ALPS O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM) made its debut on 12/30/2016, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Managed by Alps, OUSM has amassed assets over $935.13 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. This particular fund 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.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.48% for OUSM, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 2.05%.
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.
OUSM's heaviest allocation is in the Industrials sector, which is about 24.4% of the portfolio. Its Financials and Consumer Discretionary round out the top three.
When you look at individual holdings, Donaldson Co. Inc. (DCI) accounts for about 2.64% of the fund's total assets, followed by National Healthcare Corp. (NHC) and Royalty Pharma Plc (RPRX).
OUSM's top 10 holdings account for about 23.35% of its total assets under management.
Performance and Risk
So far this year, OUSM return is roughly 6.7%, and is up about 10.02% in the last one year (as of 03/02/2026). During this past 52-week period, the fund has traded between $37.73 and $47.47.
OUSM has a beta of 0.96 and standard deviation of 14.98% for the trailing three-year period. With about 110 holdings, it effectively diversifies company-specific risk .
Alternatives
ALPS O'Shares U.S. Small-Cap Quality Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
iShares Russell 2000 ETF (IWM) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. iShares Russell 2000 ETF has $73.53 billion in assets, iShares Core S&P Small-Cap ETF has $95.53 billion. IWM has an expense ratio of 0.19% and IJR changes 0.06%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Blend
Bottom Line
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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ALPS O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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