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

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

The fund is sponsored by Alps. It has amassed assets over $889.41 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.

Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain 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 0.90%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 32.30% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Genpact Ltd. (G) accounts for about 2.37% of total assets, followed by Dolby Laboratories Inc. (DLB) and Sei Investments Co. (SEIC).

The top 10 holdings account for about 22.07% 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 lost about -1.95% so far this year and it's up approximately 2.46% in the last one year (as of 05/15/2025). In the past 52-week period, it has traded between $37.73 and $47.20.

The ETF has a beta of 0.97 and standard deviation of 17.16% 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 good 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 $62.57 billion in assets, iShares Core S&P Small-Cap ETF has $78.52 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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