Invesco PowerShares to debut low-volatility high-dividend ETF based on new S&P index

Oct 15th, 2012 | By | Category: Equities

Invesco PowerShares, a leading global provider of exchange-traded funds (ETFs), has announced the forthcoming launch of the PowerShares S&P 500 High Dividend Portfolio ETF (SPHD).

Invesco PowerShares to debut low-volatility high-dividend ETF based on new S&P index

The PowerShares S&P 500 High Dividend Portfolio will provide access to the 50 securities in the S&P 500 Index that historically have provided high dividend yields with lower volatility.

The fund is scheduled to debut on the NYSE Arca on October 18, 2012.

Ben Fulton, managing director of global ETFs at Invesco PowerShares, said: “The PowerShares S&P 500 High Dividend Portfolio (SPHD) combines two key objectives that are important to many investors today: an emphasis on high dividend equities with the well-documented benefits of low-volatility securities.”

The underlying index for the ETF is the S&P Low Volatility High Dividend Index, a newly launched index from S&P Dow Jones Indices and the first of its kind to identify high-yielding securities with low levels of volatility.

Aimed at income-seeking equity investors, the index applies a low volatility screen on a high-yield basket of securities drawn from the universe of S&P 500. It is designed to perform well in absolute terms and on a risk-adjusted basis compared to the S&P 500 Index; as of Sept 30, 2012, it had a dividend yield of 4.51%.

Vinit Srivastava, director of strategy indices at S&P Dow Jones Indices, said: “Income has been a primary focus for many investors in 2012 as dividend funds continue to draw an increasing amount of interest; however, volatility is still at the forefront of investor minds as market uncertainty continues to factor into their investment decisions. The S&P 500 Low Volatility High Dividend index captures these two trending investment themes into one unique design and concept.”

“We are pleased to once again join with S&P Dow Jones Indices for the PowerShares S&P 500 High Dividend Portfolio (SPHD),” added Fulton. “S&P Dow Jones Indices is well respected in financial circles and their index methodology uses a simple, transparent model for constituent selection that we believe will resonate well with investors seeking higher yields and lower volatility.”

Invesco PowerShares currently has approximately $4.25 billion in assets under management (AUM) in ETFs benchmarked to S&P indices.

A summary of the index constituent selection methodology is as follows:

  • All stocks in the S&P 500 are ranked in descending order by their 12-month trailing dividend yield.
  • The top 75 stocks with the highest dividend yield are selected, with the number of stocks from each GICS sector capped at 10.
  • Using available price return data for the trailing 252 trading days leading up to each index rebalancing reference date, the realised volatilities of the 75 selected highest-yielding stocks are calculated.
  • The 75 selected highest-yielding stocks are then ranked in ascending order by their realised volatility. The top 50 securities with the lowest realised volatility form the index.

This latest fund will expand the available range of PowerShares factor-driven ETFs to 13, making it the largest factor-driven suite of ETFs available today, with more $3.7 billion in AUM.

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