S&P Global Dividend Aristocrats Index unveiled; licensed to SSgA SPDR ETF

Apr 4th, 2013 | By | Category: ETF and Index News

Leading global index provider S&P Dow Jones Indices has added to its popular range of ‘Dividend Aristocrats’ indices with the launch of the S&P Global Dividend Aristocrats Index.

S&P Global Dividend Aristocrats Index unveiled; licensed to SSgA SPDR ETF

S&P Dow Jones has expanded its popular ‘Dividend Aristocrats’ family to include the S&P Global Dividend Aristocrats Index.

The index is designed to measure the performance of the highest dividend yielding companies within the S&P Global Broad Market Index that have followed a policy of increasing or stable dividends for at least 10 consecutive years.

The launch expands the widely recognised Dividend Aristocrats family, which includes, among others, the S&P High Yield Dividend Aristocrats, underlying index to the $11 billion NYSE Arca-listed SPDR S&P Dividend ETF (SDY) and the $1 billion SPDR S&P US Dividend Aristocrats UCITS ETF (SPYD), cross-listed across Europe.

The new global index is set join these funds sometime soon, following its licensing to State Street Global Advisors’ SPDR platform for the creation and launch of an exchange-traded fund (ETF).

Vinit Srivastava, director of strategy indices at S&P Dow Jones Indices, said: “Dividend income has been an important theme throughout 2012 and going into 2013 for various reasons chiefly because of the low interest rate environment that has reduced investor options from traditional income generating asset classes.”

He added: “Increasingly, investors looking for equity income are focusing on quality but are not constraining themselves by geographies. The S&P Dividend Aristocrats series of indices rely on stringent dividend growth criteria combined with other stability conditions. S&P Global Dividend Aristocrats Index applies this framework to a global universe.”

The index methodology aims to achieve a balance between high dividend yield and dividend sustainability and growth. It incorporates criteria on dividend payout ratio and maximum indicated dividend yield to exclude companies whose future dividend payout may be considered potentially less sustainable.

Among these criteria, stocks must have increased dividends or maintained stable dividends every year for at least 10 consecutive years; earnings per share (EPS) must be positive and the payout ratio must not exceed 100%; and stocks cannot exceed a 10% indicated dividend yield, so as to exclude companies whose dividends may not be sustainable, as well as companies whose stock prices have deteriorated rapidly.

Stocks that meet these criteria are then ranked based on their indicated dividend yield. The top 100 stocks with the highest indicated dividend yield are selected and weighted by indicated annual dividend yield to tilt the portfolio towards companies with higher dividend yields. The number of stocks from each country is capped at 20. If the number of stocks from a country reaches 20, the highest yielding stocks from other countries are selected until the number of index stocks reaches 100.

Index constituents are reviewed once a year in January. At each rebalancing modifications are made to stock weights to ensure diversification across individual stocks, sectors and countries. The index methodology also incorporates minimum market capitalisation ($1 billion) and liquidity criteria (average daily value traded of at least $5 million).

As of launch date, major constituents include Enagas, GDF Suez, AstraZeneca, New York Community Bancorp, Fortum Oyj, TransAlta, CFS Retail Property Trust, TeliaSonera, Vodafone and Advanced Info Service. The largest sector weights are Financials, Utilities and Industrials.

Given the success of SSgA SPDR’s existing range of S&P Dividend Aristocrats ETFs, which also includes the SPDR S&P UK Dividend Aristocrats UCITS ETF (UKDV) and SPDR S&P Euro Dividend Aristocrats UCITS ETF (EUDV), in addition to the funds mentioned above, the new global fund will likely pull in assets quickly once it makes its debut.

But it will come up against competition. There are already a number of successful global dividend ETFs, including the Global X SuperDividend ETF (SDIV) and Guggenheim S&P Global Dividend Opportunities Index ETF (LVL) listed in the US and the db X-trackers Stoxx Global Select Dividend 100 UCITS ETF (XGSD) and iShares Stoxx Global Select Dividend 100 ETF (DE) (ISPA) listed in Europe.

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