S&P indices for ETFs target consistent and growing dividend payments
S&P Indices has launched a eurozone version of its High Yield Dividend Aristocrats indices for ETFs, following the firm’s announcement last week it would also launch high beta equity indices to underpin tracking products.
The dividend indices have been licensed to State Street Global Investors, whereas the high beta benchmark licences went to Invesco PowerShares.
SSgA is expected to launch products based off the dividend benchmarks as part of its SPDR range.
Companies must have increased their dividends or maintained stable distributions for at least 10 consecutive years, among other measures, to qualify for inclusion in S&P Indices’ S&P Euro High Yield Dividend Aristocrats benchmark.
S&P Indices is also launching a UK equity variant, and already runs one based on companies in the S&P 1500 index.
Alka Banerjee, vice president at S&P Indices, said: “Traditionally, dividends constituted only about a third of total equity returns. But the current economic climate of sluggish growth suggests that dividend-producing stocks serve an important purpose for many investors because they are usually more resilient than other asset classes in a falling market.”
Eleanor Hope-Bell, head of UK and Northern Europe sales at SSgA, said market volatility and low interest rates had led clients to ask for European and UK dividend products.
“While other dividend indices tend to focus only on high dividend yields, the Dividend Aristocrats indices look beyond pure yield to sustainable and quality yield, providing access to companies that have a long track record of consistently paying dividends,” she said.
The methodology has criteria for dividend payout ratios, and maximum indicated dividend yield, thus targeting sustainable dividend payouts.
The indices’ launch follow S&P Indices’ newly announced equity benchmarks of 200 shares in developing, and developed, markets, whose movements follow those markets’ moves, but are more magnified.
The S&P BMI International Developed High Beta Index has the 200 most market-sensitive constituents from the 24 countries in the S&P Developed Ex-US-Korea LargeMidCap index.
The S&P BMI Emerging Markets High Beta index will also have a list of the 200 most market-sensitive constituents, as applied to the S&P Emerging Plus LargeMidCap index, which has 21 countries.