MSCI Takes Indexes to Divvying New Heights

September 23, 2006

Index provider announces launch of dividend indexes even as Vanguard launches a FTSE High Yield Dividend fund.

The powerhouse index provider MSCI announced that it would join the dividend index party and launch a global family of indexes designed to track the performance of securities that yield high dividends on a consistent basis. They will be called MSCI High Dividend Yield Indices.

The new dividend-seeking indexes will subindexes of existing MSCI equity indexes (regional, country, and composite). MSCI noted in its announcement that the high dividend yield methodology can be applied to any existing parent index, such as MSCI World or MSCI EAFE, based on client demand, thus facilitating the creation of new vehicles for passive investment.

Because the indexes will be tied to existing indexes, when the methodology is overlaid onto the index their performance records can be backtested for 10 years or more.

Vanguard Taps FTSE for High Yield Dividend Index Fund

Index investing pioneer Vanguard is also expanding its product offerings with regard to high dividend yielding securities.  The mutual fund giant recently announced that the Vanguard High Dividend Yield Index Fund will be launched in the fourth quarter of 2006 and will be available in both traditional and ETF shares.

The fund will track the performance of the FTSE High Dividend Yield Index which is market-cap weighted.  Interestingly, the fund will charge 40 basis points, which is more than Vanguard's other large cap-value index funds and even more than Vanguard's actively managed dividend funds.

 

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