A New Breed: Income-Driven Dividend Funds

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

Starting this week, we begin a new series about exchange-traded funds that will focus on income-driven dividend funds. Today’s featured ETF is O’Shares FTSE US Quality Dividend ETF (OUSA), a U.S. fund with total net assets of $209.98 million.

Income-driven dividend funds typically focus on tracking companies that are regular dividend payers, based on certain criteria that vary from fund to fund. OUSA specifically gives investors access to large- and mid-cap U.S. issuers, which are selected based on quality, low volatility and dividend yield.

The high quality and low volatility requirements are designed to cut risk by reducing exposure to companies that may possess high dividend payouts but have endured large price declines.

Since its launch on July 14, 2015, OUSA’s share price has gone up 9.34% to notch a decent gain. Its year-to-date gain of 7.92% significantly outperforms the S&P 500’s 1.79% rise. OUSA has a dividend yield of 2.30%, and its expense ratio is 0.48%. OUSA has shown a fairly stable upward trend in its share price, starting in 2016, based on the chart below.

ETF_Talk_1

You likely will recognize most of the top holdings of OUSA. They include Johnson & Johnson (JNJ), 5.37%; Exxon Mobil Corporation (XOM), 5.33%; Verizon Communications (VZ), 4.40%; AT&T (T), 4.29%; and Procter & Gamble (PG), 3.46%. The fund is fairly diversified, since it holds more than 140 companies in its portfolio. Its top 10 holdings comprise only 37.81% of the fund.

If you are interested in investing in a relatively stable income-driven fund with some of the biggest dividend-paying company names in its portfolio, I encourage you to look into O’Shares FTSE US Quality Dividend ETF (OUSA).

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter.

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As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

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