Pacer US Cash Cows 100 ETF (COWZ): How to Buy

The Pacer U.S. Cash Cows ETF (COWZ 0.67%) is an exchange-traded fund (ETF) that invests in mid- and large-cap U.S. companies with high levels of free cash flow. The idea is that companies with a high free-cash-flow yield are well positioned to withstand difficult economic climates and can grow earnings, increase dividend payouts, and initiate stock buybacks.

Read on for an in-depth look at the Pacer US Cash Cows 100 ETF, including its methodology, performance history, top holdings, and some factors to consider before you invest.

What is it?

What is the Pacer US Cash Cows 100 ETF?

The Pacer US Cash Cows 100 ETF provides exposure to mid- and large-cap U.S. stocks with high free-cash-flow yields, sometimes called "cash cows." The fund uses the Pacer US Cash Cows Growth Index as its benchmark.

To calculate free-cash-flow yield, you divide a company's free cash flow per share by its market price per share. A high free-cash-flow yield is generally a good thing because it means a company has enough cash to meet its debt obligations, fund its operations, and make dividend payments.

The Pacer U.S. Cash Cows 100 ETF's benchmark index screens stocks from the Russell 1000 index based on average projected free cash flows and earnings for the next two fiscal years. It excludes companies with negative average projected free cash flows or earnings and financial stocks other than real estate investment trusts (REITs).

The index then ranks companies by free-cash-flow yield for the trailing-12-month period. It includes the top 100 companies.

Investing in the Pacer US Cash Cows 100 ETF may be appealing if you're looking for investment income or value stocks or want a diversified mix of stocks with the financial strength needed to weather a recession. However, you may want to look elsewhere if you're a growth-oriented investor.

How to buy

How to buy the Pacer US Cash Cows 100 ETF

Anyone can buy shares of this ETF in just a few minutes. Follow this four-step guide to invest in the Pacer US Cash Cows 100 ETF -- or to buy any ETF or publicly traded stock.

Step 1. Open a brokerage account

You'll need a brokerage account before you can buy ETFs or stocks. Opening a brokerage account online is pretty easy, but you'll need to provide some personal details, like your date of birth, address, Social Security number, and employment information. Once you've set up your account, you must transfer funds to make your first trade.

Step 2. Make a budget

Before you start investing, it's essential to make a budget. It's never wise to allocate your entire investment budget to a single stock or two, but investing in ETFs and mutual funds is a bit different. Both types of investments are collections of many different stocks, offering instant diversification in a way that no individual stock can provide.

Still, you probably don't want to throw all your investment funds into the Pacer U.S. Cash Cows 100 ETF. Even if you've determined the fund is a good fit for your goals, you may also want to have some growth stocks, sector ETFs, and bonds in your portfolio.

Step 3. Do your research

Take time to do your homework before you invest in any ETF or stock. A good place for ETF investors to start is the fund's summary prospectus. It provides an overview of the fund's investment objectives and strategy, fees and expenses, performance history, and top holdings, all of which are important when choosing the best ETFs to buy.

Step 4. Place an order

If you decide to invest in the Pacer U.S. Cash Cows 100 ETF, go ahead and place an order. Enter the ticker "COWZ" into your broker's website or mobile app. Next, enter the number of shares you're buying or the dollar amount of your investment (if your broker allows you to buy fractional shares).

You'll also be asked whether you want to place a market order or a limit order. A market order means the order is executed immediately, regardless of price. A limit order is fulfilled only if the price hits a threshold you specify.

After you've provided the required info, you'll receive an order confirmation. Check it over to verify the information is correct. If everything looks good, go ahead and place the order.

Holdings

Holdings of the Pacer US Cash Cows 100 ETF

The Pacer US Cash Cows 100 ETF's 100 holdings are rebalanced and reconstituted each quarter so that no company accounts for more than 2% of its weightings. Its largest concentrations are in the energy, technology, and consumer discretionary sectors, which together account for just over 60% of its holdings.

The fund's five largest holdings are:

1. Airbnb (ABNB 0.78%)
2. Hewlett Packard Enterprise (HPE 2.08%)
3. Nucor (NUE 0.96%)
4. HP (HPQ 3.0%)
5. Bristol-Myers Squibb (BMY 1.36%)

Should I invest?

Should I invest in the Pacer US Cash Cows 100 ETF?

No investment is right for everyone, but here are some reasons you may want to invest in this ETF:

• You prefer to invest in established companies instead of higher-risk growth companies that offer the possibility of higher returns.
• You want to earn investment income.
• You're concerned about a recession and want to invest in companies positioned well to withstand tough times.
• You're a value investor.

You may want to avoid investing in the Pacer US Cash Cows 100 ETF if:

• You prefer aggressive growth stocks with higher potential returns.
• You're focused on maximizing dividend yield, as you can often find higher yields by focusing on sectors such as utilities, financials, and real estate.
• You already have heavy exposure to energy stocks, mature tech companies, and the consumer discretionary sector.

Dividends

Does the Pacer US Cash Cows 100 ETF pay a dividend?

The Pacer US Cash Cows 100 ETF has paid quarterly dividends since its inception in 2016. The fund's annual dividend yield is 1.69% based on its share price in October 2024.

That's a bit higher than the S&P 500 index's yield of 1.22%. But if maximizing dividend income is a high priority, consider a dividend ETF instead.

Expense ratio

What is the Pacer US Cash Cows 100 ETF's expense ratio?

An ETF expense ratio is the percentage of an investment that goes toward fees. The ETF's expense ratio is 0.49%. That means if you put $10,000 into the fund, you'd pay $49 in fees, and the remaining $9,951 would be invested.

A 0.49% expense ratio is relatively reasonable. However, many ETFs that track a broad swath of the stock market, such as S&P 500 ETFs, have expense ratios of less than 0.1%.

Historical record

Historical performance of the Pacer US Cash Cows 100 ETF

This ETF was created in late 2016. Here's a look at how the fund has performed from its inception through Sept. 30, 2024:

In the past five years, the Pacer US Cash Cows 100 ETF has outperformed top S&P 500 ETFs, with total returns of almost 127% versus about 112% for S&P 500 ETFs. In 2023 and 2024, though, this ETF has produced subpar returns compared to the S&P 500, as growth investing has come back into vogue.

The Pacer US Cash Cows 100 ETF has held up fairly well during bear markets and stock market volatility, which isn't surprising given its focus on companies with high free-cash-flow yields. Take 2022, for example, a year in which the S&P 500 index dropped by about 18%. The ETF still delivered modest returns of 0.2%.

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The bottom line

The Pacer US Cash Cows 100 ETF is a solid pick for long-term ETF investors. Companies that can generate more cash than they need to fund operations can often pursue growth initiatives, pay dividends, and buy back shares. This ETF isn't a great pick for investors seeking high growth, but it's certainly worth a look for value investors looking for financially stable companies.

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