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Diversify the Herd: GCOW

Diversify the
Herd

Income-potential is consistently top of mind for many investors,
and even more agree that diversity in a portfolio is essential.
So why not diversify where your portfolio’s free cash flow yield is coming from?

 

The Pacer Global Cash Cows Dividend ETF (GCOW) takes the free cash flow yield screen strategy global, aiming to find high quality, dividend-paying companies.

What is Free Cash Flow Yield?
Free cash flow yield (FCFY) is a valuation ratio. It’s calculated by dividing a company’s Free Cash Flow by its Enterprise Value (Market Cap + Debt – Cash).

Positive free cash flow means that a company generates more cash than it needs to run the business. And companies with the highest FCFY are better positioned to take part in mergers or acquisitions, pay dividends, or buy back stock.

Free Cash Flow Yield in Action
Every Cash Cow ETF uses free cash flow yield for screening stocks into the fund based on the fund’s rebalancing calendar and benchmark index.

But with GCOW, there’s an added dividend screen making its process unique from the other Cash Cows. It looks like this:

  • Screening the FTSE Developed Large-Cap Index for the top 300 free cash flow-yielding stocks
  • Screening those 300 companies for the top 100 dividend yielders (based on a trailing 12-month period)
  • Weighting those 100 companies in GCOW by their dividends (on a 12-month basis), with a 2% cap

GCOW repeats this rebalancing process semi-annually. Aiming to give investors exposure to the highest quality stocks based on current market conditions.

Diversify Your Herd