New 100-stock indexes cover the world and the world ex-U.S.
Standard & Poor's is continuing its frenzy of index launches by rolling out more strategy indexes; on Friday it announced the S&P Dividend Opportunities Indexes. The new series will provide exposure to high-yielding stocks for income-oriented investors and currently includes a global index and a global ex-U.S. index called the S&P Global Dividend Opportunities Index and the S&P International Dividend Opportunities Index, respectively.
The investable universe for the indexes includes all listed dividend-paying stocks and American Depository Receipts (ADRs), with certain restrictions on components regarding volume, primary exchange, value traded and market capitalization (a minimum of $1.5 billion). Components must also be profitable for the preceding one-year period and have positive cumulative five-year earnings growth. Once all those requirements have been met, stocks are ranked according to their dividend yields, with the top 100 selected for inclusion —although a 30-stock buffer for existing constituents is in place to lower turnover. In addition, weightings of individual stocks at rebalances are capped at 3%, while emerging markets and income trusts are both capped at a total weight of 10%. Individual sectors and countries (that are not emerging markets) are also capped at 25% of the index. Components are weighted to achieve maximum yield while still complying with these restrictions.
Dow Jones Indexes has similar indexes tracking the leading dividend-paying stocks in a region—the Dow Jones Global Select Dividend Index and the Dow Jones EPAC Select Dividend Index. The former covers the global region, while the latter covers Europe, Asia and Canada. And WisdomTree has the WisdomTree DEFA High-Yielding Equity Index, covering developed markets excluding the U.S. All of the aforementioned indexes are dividend-weighted and underlie exchange-traded funds.
The S&P Global Dividend Opportunities Index was up 17.11% for 2007, while the international index was up 20.95%. They achieved five-year annualized returns of 26.42% and 31.38%, respectively, and seven-year annualized returns of 17.96% and 21.75%.
Meanwhile, the Dow Jones Global Select Dividend Index was up 9.28% in 2007 and had an annualized five-year return of 22.74%. The EPAC region index was up 8.95% in 2007 and had an annualized five-year return of 27.16%. The WisdomTree DEFA High-Yielding Equity Index rose 12.95% in 2007.
"The launch of these two indices underscores Standard & Poor's commitment to producing alpha generating strategy indices with a methodology designed to provide returns over and above traditional benchmark indices," said Tim Eisenhauer, vice president of Standard & Poor's Index Services.
"In addition to providing investors with access to income-producing securities, the indices will also provide a defensive play for those investors seeking cover during volatile market environments," he added.