Amplify unveils dividend-focused free cash flow ETF

Sep 20th, 2023 | By | Category: Equities

Amplify ETFs has launched a new rules-based ETF investing in US companies exhibiting both high free cash flow yields and a history of dividend growth.

Amplify unveils dividend-focused free cash flow ETF

The ETF targets companies with high free cash flow yields and a consistent history of dividend growth.

The Amplify Cash Flow Dividend Leaders ETF (COWS US) has been listed on Nasdaq.

Free cash flow is a measure of a company’s financial performance, calculated as operating cash flow minus capital expenditures. It represents the cash that a company is able to generate after spending the money required to maintain or expand its asset base.

The metric is valuable as company management typically tends to have less discretion on how free cash flow is reported compared to other metrics such as sales, earnings, assets, or liabilities which can, in some cases, be massaged.

According to Amplify, by combining high free cash flow with uninterrupted dividend growth, the strategy targets financially secure companies capable of delivering attractive and sustainable yields with the added potential for capital appreciation.

Christian Magoon, CEO of Amplify ETFs, said: “ETF investors have gravitated towards companies with high free cash flows due to their financial stability. COWS takes this investment strategy one step further by focusing on the dividend-paying companies in this universe which should allow shareholders to receive attractive dividend income.”


The fund is linked to the Kelly US Cash Flow Dividend Leaders Index which selects its constituents from a universe of the largest 1,000 non-financial companies listed in the US.

The methodology first ranks the companies in the universe using a score based on a combination of trailing 12-month free cash flow yield and analyst consensus estimates of 12-month forward-looking free cash flow yield. The 100 highest-ranked firms are selected through to the next screening round.

Kevin Kelly, CEO of index provider Kelly Intelligence, said: “We evaluate free cash flow in totality, not only looking at trailing but more importantly, by evaluating future free cash flows, which we believe enhances the dividend screen that is inclusive across all market segments.”

Any firm that has not consistently raised its dividends every year over the past three years is then removed from the selection pool.

Additionally, the methodology excludes any company with a negative consensus earnings forecast, an indicated dividend yield within the top 10% of the initial universe, or a forward-looking payout ratio (forward 12-month indicated dividend divided by forward 12-month consensus earnings per share forecast) below 75%.

The remaining constituents are equally weighted while capping the weight of any individual sector at 24%.

As of the end of August, the index contained 70 stocks with the most notable sector exposures being energy (25%), materials (20%), consumer discretionary (19%), industrials (9%), and information technology (8%).

The ETF comes with an expense ratio of 0.39% which is being waived for the fund’s first year of operation.

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