S&P Dow Jones licenses index to Invesco PowerShares for ETF development
16 October 2012
News, Global, USA
S&P Dow Jones Indices has launched the S&P 500 Low Volatility High Dividend index which applies a low volatility screen on a high yield basket of securities drawn from the universe of S&P 500. The index is the first of its type designed to identify high yielding securities with low levels of volatility.
The S&P 500 Low Volatility High Dividend index has been licensed to Invesco PowerShares, for the creation and launch of an exchange traded product. Invesco PowerShares is also the licensee for the closely followed S&P 500 Low Volatility index.
The S&P 500 Low Volatility High Dividend index is designed to serve as a benchmark for income seeking equity investors. The index seeks to measure 50 high yielding companies within the S&P 500, while meeting diversification, volatility, and tradability requirements.
“Income has been a primary focus for many investors in 2012 as dividend funds continue to draw an increasing amount of interest; however, volatility is still at the forefront of investor minds as market uncertainty continues to factor into their investment decisions,” says Vinit Srivastava, director of strategy indices at S&P Dow Jones Indices. “The S&P 500 Low Volatility High Dividend index captures these two trending investment themes into one unique design and concept.”
A brief synopsis of the selection of constituents for the S&P 500 Low Volatility High Dividend index is as follows:
• All stocks in the S&P 500 are ranked in descending order by their 12-month trailing dividend yield.
• The top 75 stocks with the highest dividend yield are selected, with the number of stocks from each GICS sector capped at 10.
• Using available price return data for the trailing 252 trading days leading up to each index rebalancing reference date, the realized volatilities of the 75 selected highest yielding stocks are calculated.
• The 75 selected highest yielding stocks are then ranked in ascending order by their realised volatility. The top 50 securities with the lowest realized volatility form the index.
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