S&P Dow Jones Indices has unveiled the S&P Dividend Growers Index Series, a new family of indices tracking companies that have consistently increased their dividend payments every year for a specified number of years.
The indices target companies that have consistently increased their dividend payments every year for a specified number of years.
The series has debuted with the launch of two indices – the S&P US Dividend Growers Index targets US-listed stocks while the S&P Global Ex-US Dividend Growers Index covers developed and emerging markets excluding the US.
The indices may serve as performance benchmarks or as underlying reference indices for smart beta investment products such as ETFs.
Dan Draper, Chief Executive Officer at S&P Dow Jones Indices, said: “S&P Dow Jones Indices has been a pioneer in developing innovative, independent, and transparent indices that measure and capture important potential signals of companies’ well-being through long-term and consistent dividend payments.
“S&P DJI is pleased to license our indices to clients so that they, in turn, can offer accessible and cost-efficient products to help end investors save for retirement and meet their investment goals.”
Methodology
The indices utilize the S&P United States BMI and the S&P Global Ex-US BMI as their starting universes for stock selection. These parent indices cover stocks from across the market capitalization spectrum while real estate investment trusts (REITs) are excluded from the eligible pool.
Stocks are screened for liquidity – only US companies with average daily trading volume above $1 million are eligible, while the threshold is $500,000 for the global ex-US index.
Stocks are also subject to an indicated annual dividend yield exclusion that omits the top 25% highest-ranked companies from each universe. The purpose of this screen is to remove potential dividend traps – companies with high but unsustainable dividend yields that subsequently reduce or scrap their payments.
To reduce excessive turnover, existing index constituents are only removed if they rank in the top 15% by dividend yield.
The US dividend growers index selects stocks with ten years of consistent dividend growth, while the global ex-US dividend growers index selects stocks that have increased their dividends for seven consecutive years. Constituents are weighted by float-adjusted market capitalization subject to a single stock cap of 4%.
The new index series builds on the success of S&P’s ‘Dividend Aristocrats’ indices which serve as the underlying reference indices for suites of ETFs offered by ProShares and State Street Global Advisors (SSGA) which command many billions of dollars in assets under management.
The S&P Dividend Aristocrat indices follow a similar methodology as described above except companies are also eligible for these indices if they simply maintain their dividend payments for a specified number of years. Constituents are weighted by dividend yield to enhance income potential.
S&P DJI recently began rolling out sustainable versions of the Dividend Aristocrats indices whereby firms must also satisfy specific environmental, social, and governance (ESG) criteria to be eligible for selection.