Introduction

The Pacer US Small Cap Cash Cows 100 ETF (CALF, $48.73) monitors the progress of the Pacer US Small Cap Cash Cows Index, a superior small-cap ETF that focuses on companies that generate positive free cash flow – the remaining money after paying expenses, taxes, interest, and long-term investments.

This ETF selects the top 100 stocks from the S&P SmallCap 600 with the highest cash flow yields, calculated by dividing free cash flow by enterprise value. These chosen stocks are then weighted based on their 12-month free cash flow.

Stocks in the index have market caps ranging from $88 million to $4.7 billion. The average weighted market cap stands at $2.4 billion, with an average free cash flow yield of 13.7%. Investing in companies with high free cash flows often leads to superior dividend growth potential and stronger earnings.

The main sectors by weight in CALF are consumer discretionary (35.9%), industrials (16.8%), and technology (10.9%). Notable holdings in this ETF include M/I Homes (MHO), Alpha Metallurgical Resources (AMR), and Boise Cascade (BCC), each with a significant weight in the fund.

Since its establishment in June 2017, CALF has delivered an annualized total return of 10.2% through September 30, outperforming the S&P SmallCap 600 Index, which has had a return of 5.9%.

For investors looking to expand their portfolio with more of Pacer's Cash Cow series of ETFs, the Pacer Cash Cow Fund of Funds ETF (HERD) provides an opportunity to invest 20% in each of the five Cash Cow ETFs, including CALF.