S&P Dow Jones Indices (S&P DJI) has launched the S&P MidCap 400 Dividend Aristocrats Index, which is designed to measure the performance of companies within the S&P MidCap 400 that have followed a managed dividends policy of consistently increasing dividends every year for at least 15 years. The index has been licensed to ProShare advisers LLC for ETF development.
Vinit Srivastava, senior director at S&P Dow Jones Indices, said that the mid-cap universe is an overlooked segment of the market in an investor’s hunt for income-producing asset classes and that dividend growth is a very important theme in the income space and especially amongst ETFs.
“Our family of S&P Dividend Aristocrats Indices were tracking $19bn in ETF assets at the end of 2014, approximately $3bn of which was the increase over 2014,” he said. “S&P DJI indices are tracked by over $47bn in ETF assets at the end of 2014 including all other families. Investors like the dividend growth story because it provides exposure to firms that have the ability to grow their cashflows and pay them out in a growing manner over a long period of time – this typically means that these firms are well managed through various economic cycles. The aspect of dividend growth also assumes more importance in the context of rising rates because it provides an implicit hedge on the price if dividends continue to grow.”
Market participants, said Srivastava, have regarded sustained dividend growth, especially over long periods, as an important measure for quality, income-generating companies.
The S&P MidCap 400 Dividend Aristocrats index portfolio has both capital growth and dividend income characteristics, as opposed to portfolios that are pure yield or pure capital appreciation oriented. By equally weighting the index constituents, the S&P MidCap 400 Dividend Aristocrats represents the performance of this group of stocks by treating each constituent as a distinct investment opportunity without regard to size.
The S&P’s Aristocrats family of indices has been used in 61 structured products sold in the US market since 2010 of which 57 are still live products, SRP data shows. The most popular of these benchmarks is the S&P 500 Dividend Aristocrats Daily Risk Control 8% ER which is linked to 52 products sold by JPMorgan Chase in the US and one by Pioneer Investments in Italy, followed by the S&P 500 Dividend Aristocrats Daily Risk Control 10% ER with four products sold by Cantor Fitzgerald in Ireland and the S&P High Yield Dividend Aristocrats which has been featured in a basket of indices on two notes sold by Barclays in the US.
Srivastava said that the S&P Dividend Aristocrats Indices are not only a dividend story but also a quality dividend story, and therefore can add value to investors in structured products.
In addition, the index provider has launched the S&P Global 1200 Dividend Stability Low Volatility index, a new benchmark designed to measure the performance of stocks that achieve a balance between dividend yield, dividend growth and volatility.
The new S&P Global 1200 Dividend Stability Low Volatility index joins a lineup of some 100 factor-based indices and is the sixth factor-based dividend index launched by S&P DJI this year alone.
The S&P Global 1200 Dividend Stability Low Volatility Index selects 100 stocks from the S&P Global 1200 which measures the performance of 30 countries across the Americas, Europe and Asia Pacific. The least volatile stocks that pass the index’s dividend growth, dividend payout ratio and dividend yield screens are selected. The selected constituents are then weighted by estimated projected dividend yield.
The index follows a string of similar smart beta indices launched by S&P DJI, including the S&P 500 Low Volatility Enhanced Index and the S&P Europe 350 Buyback Dividend Stability Low Volatility Index which is part of the S&P Europe 350 series. There are 81 products on SRP’s database linked to the S&P Europe 350 Low Volatility Index, mainly in Sweden (56 products) and Finland (18 products); 16 products linked to the S&P Europe 350 index; eight products linked to the S&P Europe 350 Risk Control ER Index, all of which were sold in Italy by Pioneer Investments; and seven products linked to the S&P Europe 350 Daily Risk Control 10% ER Index.
S&P Dow Jones Indices, said Vinit, has more than $80bn in assets tracking both single and multi-factor strategies.
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