New ETFs target high-quality U.S. mid- and small-cap companies with durable free cash flow profiles
Pacer ETFs, the leading U.S. issuer of free cash flow ETFs, today announced the launch of the Pacer S&P MidCap 400 Quality FCF Aristocrats ETF (MCOW) and the Pacer S&P SmallCap 600 Quality FCF Aristocrats ETF (SCOW), based on two of S&P Dow Jones Indices (S&P DJI) S&P Quality FCF Aristocrats® Indices. These new funds join the firm’s growing Free Cash Flow Aristocrats lineup, which began in May with the launch of the Pacer S&P 500 Quality FCF Aristocrats ETF (LCOW), the large-cap version of the strategy.
“Utilizing free cash flow (FCF) to evaluate a company’s quality can be a powerful way to identify financially resilient businesses. By emphasizing consistent and efficient FCF generation, the recently expanded S&P Quality FCF Aristocrats Indices offer a robust framework for identifying high-quality companies across all U.S. market capitalizations,” said Rupert Watts, Head of Factors and Dividends at S&P Dow Jones Indices. “S&P DJI is excited to license these indices to Pacer ETFs as it expands its offering to market participants with these timely launches.”
MCOW and SCOW are designed to identify financially resilient U.S. companies outside the large-cap space. MCOW tracks the S&P MidCap 400 Quality FCF Aristocrats Index, targeting mid-sized companies with at least seven consecutive years of positive free cash flow. Eligible firms are then ranked by a blend of free cash flow margin and return on invested capital (ROIC), key indicators of capital efficiency and operational strength. SCOW applies the same disciplined methodology to small-cap stocks within the S&P SmallCap 600 Quality FCF Aristocrats Index, selecting companies that combine durable free cash flow generation with high profitability metrics.
The result is a portfolio of mid- and small-cap names with a proven ability to generate and manage capital effectively, even through changing market conditions. This consistent free cash flow screen is more than a financial filter; it helps identify companies capable of generating cash across the business cycle and signals the presence of a durable business model and sustainable competitive advantages.
“With MCOW and SCOW, we’re expanding our Free Cash Flow Aristocrats series to offer investors broader exposure to high-quality companies across the market cap spectrum,” said Sean O’Hara, President of Pacer ETFs. “These strategies give investors a way to stay focused on financially resilient businesses while also diversifying beyond large caps.”
The launch of MCOW and SCOW builds on the success of Pacer’s Cash Cows ETF™ Series, which focuses on companies with high free cash flow yields. While the Cash Cows Growth series leans toward growth, exhibiting higher earnings and sales growth, the Free Cash Flow Aristocrats series reflects a quality-oriented approach, emphasizing operating margins and long-term profitability driven by sustained cash flow.
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