Combining the two well-known investment themes of low volatility and income, S&P Dow Jones Indices announced the launch of the S&P Europe 350 Low Volatility High Dividend Index. The Index, which is designed to serve as a benchmark, measures the performance of 50 high yielding companies within the S&P Europe 350® that meet diversification, volatility, and tradability requirements.
The S&P Europe 350 is an equity index drawn from 17 major European markets, covering approximately 70% of the region's market capitalization. It is a unique index, designed to provide broad market exposure in Europe through an index that is efficient to replicate.
“The Low Volatility High Dividend framework used to create this Index is unique to S&P Dow Jones Indices and has already been applied to the S&P 500,” says Vinit Srivastava, Senior Director at S&P Dow Jones Indices. “The innovative S&P Europe 350 Low Volatility High Dividend Index combines two investment themes, low volatility and high dividend, using price volatility to eliminate typical dividend traps. Historically, it has been found that high price volatility is a good indicator of companies in stress.”
To be included in the S&P Europe 350 Low Volatility High Dividend Index, a stock must be a member of the S&P Europe 350. All stocks in the selected universe are ranked in descending order by their 90-day trailing dividend yield. The top 75 stocks with the highest dividend yield are then selected, provided that the number of stocks from each GICS® sector and country is capped at 15.
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 realized volatility. The top 50 securities with the lowest realized volatility form the S&P Europe 350 Low Volatility High Dividend Index, which is equally weighted.
For more information : www.spdji.com
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