S&P Dow Jones Indices (S&P DJI) and the Lima Stock Exchange (BVL) have teamed up to launch the S&P/BVL Peru Dividend Index, the first index designed to offer investors targeted exposure to Peruvian companies that have historically paid dividends. The smart beta index has the potential to be used as the underlying for future exchange-traded funds.

S&P DJI now offers seven Peru equity indices in conjunction with BVL.

For inclusion in the index, stocks must be members of the S&P/BVL Peru Select Index, have a dividend yield greater than zero and pass minimum thresholds for liquidity and size. All stocks which meet these criteria are then weighted by 12-month trailing dividend yield with a single stock cap of 25%. The index is rebalanced semi-annually and currently has 10 constituents.

Silvia Kitchner, director of equity products, S&P DJI, commented: “Peru has seen rapid changes and developments in its capital market in recent years. Two major developments worth noting are recent improvements in liquidity and the persistent tendency of Peruvian equities to pay dividends.

“At least 70% of the companies of S&P DJI broad market index for Peru, which are also members of the S&P/BVL Peru Dividend Index, paid dividends every year over a 10-year period ending in December 2016, which could indicate a longer-term availability of yield in this market.”

The sector exposures of the index are financials (35%), materials (32%), industrials (31%) and consumer staples (3%). In the ten years to 31 May 2017, the annualised volatility of the index was 32% and the annual returns were 12%, a figure which includes 80% returns seen during the calendar year of 2016.

The S&P/BVL index family is now composed of seven different indices covering the broad equities market, large cap stocks, dividend-paying stocks, most-liquid stocks, sectors and sub-sectors, and good corporate governance companies.