Industrials Drive Gains for OUSM Small-Cap ETF

This article was originally published on ETFTrends.com.

The ALPS O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM) is benefiting from a shift back toward profitable, dividend-growing companies after a year when unprofitable stocks dominated. OUSM returned 4.6% year-to-date, with industrials companies contributing more than 3.3 percentage points of that gain, according to VettaFi.

Key Takeaways

OUSM returned 4.6% year-to-date with industrials contributing more than 3.3 percentage points. Avnet, TD SYNNEX and Littelfuse led gains on earnings beats, analyst upgrades and dividend hikes. The quality focus is paying off as small caps trade at a 20% discount to large caps.

The fund's emphasis on profitability and dividend quality positioned it to capture gains from companies posting earnings beats and raising payouts, even as broader small-cap valuations remain cheap relative to large caps, according to a January report from Janus Henderson Investors. Small caps are trading at a 20% discount to large-cap parity, the report found.

See more: Finding Attractive Entry Points Into Small-Cap and Quality Stocks

Technology distributor Avnet, Inc. (AVT) delivered the strongest contribution to OUSM's performance, returning more than 40% and adding 0.75 percentage points to the fund's overall return, VettaFi data showed. The stock hit a new 52-week high Monday following a Truist upgrade to "Buy" with an $80 price target. The firm cited Avnet's quarterly earnings beat of $1.05 per share versus the $0.95 expected.

TD SYNNEX Corp. (SNX) followed closely, returning 33.4% and contributing 0.72 percentage points. The company reported record fiscal Q1 results in late March with revenue up 18.1% year-over-year and announced a 9% dividend increase to $0.48 per share, demonstrating the dividend growth OUSM targets.

Littelfuse Inc. (LFUS) posted the highest individual stock return at 51.7%, contributing 0.63 percentage points. Management guided for double-digit revenue growth in 2026 driven by demand in data centers and grid infrastructure, according to its January earnings call.

Healthcare Holdings Add to OUSM Performance

Healthcare holdings contributed more than one percentage point to OUSM's YTD return, according to VettaFi. The sector represented 10.5% of the underlying index weight and returned 10.8% during the period.

National Healthcare Corp. (NHC) returned 25.1% and added 0.60 percentage points to performance. The skilled nursing facility operator hit an all-time high of $175.11 last week after declaring a quarterly dividend of 64 cents per share in March.

Story Continues

Royalty Pharma PLC (RPRX) contributed 0.53 percentage points with a 24.6% return. Morgan Stanley raised its price target to $63 in April, highlighting the company's R&D funding collaborations as a growth driver.

The fund's industrials exposure reached 31.4% of index weight as of the end of December, according to the OUSM factsheet. Allison Transmission Holdings Inc. (ALSN) returned 31.6% during the period after issuing a 2026 revenue forecast 4% higher than Wall Street consensus and announcing an expanded collaboration with Daimler Truck North America.

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VettaFi LLC (“VettaFi”) is the index provider for OUSM, for which it receives an index licensing fee. However, OUSM is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of OUSM.

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