Dividends Going International

December 09, 2005

Dow Jones launches new global and Canada-specific dividend indexes, as dividend investing goes international.

The dividend party is going global.

Sensing the growing interest in dividend-focused portfolios, Dow Jones launched two new indexes on December 5 designed to track the performance of dividend-screened portfolios in international markets.  The new Dow Jones Select EPAC Dividend Index tracks the performance of 100 of the top dividend-heavy companies in Europe, Asia, Australia and Canada, while the Dow Jones Select Canada Dividend Index focuses solely on the U.S.'s great neighbor to the North.

 "The Dow Jones EPAC Select Dividend Index and Dow Jones Canada Select Dividend Index were created in response to the expanding popularity of the concept of dividend investing, both in the U.S. and Europe," says Michael A. Petronella, president of Dow Jones Indexes/Ventures.

Dow Jones pioneered the dividend craze a few years ago when it launched the U.S. Select Dividend Index, the first significant dividend-focused index in the world.  The index was launched in response to the stock market scandals of 2001-2003 and the dividend tax cut, both of which focused investor attention on steady, dividend-paying companies - the antithesis of the Internet high-flyers of the late-1990s.  Barlcays Global Investors launched an exchange-traded fund (ETF) tied to the index, which quickly attracted more than $7 billion … and the dividend-boom was born.  Since then, everyone has gotten into the dividend game - from PowerShares/Intellidex to Standard and Poor's. 

History suggests that dividend-screened portfolios outperform traditional portfolios with less risk, and in the U.S., many investors have used the iShares fund and other dividend funds to replace their domestic broad market exposure.  The new EPAC index - assuming someone launches an investable product tied to it, which is a safe assumption - offers the opportunity to expand that dividend-screen to the global world.  While there is already a PowerShares ETF tied to a portfolio of dividend-heavy ADRs, it does not offer comrehensive, country-diversified exposure to global markets.

The new EPAC index does.  The new index weights country-exposure by dividend yield, and offes expsoure to most industrialized economies. Individual companies within each country are ranked according to their dividend yield.

The fact that the indx yields a gaudy 4.4 percent - and posted returns in exess of 30 percent in 2004 - will surely cach people's eye.

The Canada index is sure to attract attention as well.  Canada's economy is heavily concentrated in natural resources, and particularly in oil and gold.  The new index includes 30 of the top dividend paying stocks in the Canadian market, and offers an interesting blend of exposure to banking and natural resource stocks..

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