Last Updated: 25 September 2023
S&P Indices has created two new dividend-focused indices that will be used by SPDR to expand its ETF range.
The new launches come after the issuer reported substantial demand for two European ETFs tracking dividend benchmarks that it listed in October last year—the SPDR S&P US Dividend Aristocrats ETF and the SPDR S&P Emerging Markets Dividend ETF.
Eleanor Hope-Bell, head of UK and Northern Europe sales at SSgA, said: “With current market volatility and low interest rates, we have experienced substantial demand in our US and emerging market dividend SPDR ETFs. Our clients have asked for similar strategies in other regions. While other dividend indices tend to focus only on high dividend yields, the Dividend Aristocrats indices look beyond pure yield to sustainable and quality yield, providing access to companies that have a long track record of consistently paying dividends.”
The underlying indices, the S&P UK High Yield Dividend Aristocrats and the S&P Euro High Yield Dividend Aristocrats, are made up of the highest dividend yielding UK and Eurozone companies within the S&P Europe Broad Market Index. To qualify for inclusion, companies must have increased dividends or maintained stable dividends for at least 10 consecutive years.
The index methodology also includes criteria for dividend payout ratio and maximum indicated dividend yield to exclude firms where the future dividend payout may be viewed as less sustainable. Stocks are weighted by their indicated annual dividend yield.
Alka Banerjee, vice president at S&P Indices, said: “The current economic climate of sluggish growth suggests that dividend-producing stocks serve an important purpose for many investors because they are usually more resilient than other asset classes in a falling market. Both of these new indices have been designed to measure high yielding dividend stocks, without compromising on sustainability and growth.”
The SPDR S&P UK Dividend Aristocrats ETF will track a total return version of the underlying index, which is calculated net of the 10 percent deducted at source from UK companies’ dividends. The SPDR S&P Euro Dividend Aristocrats ETF will track the net total return version of its index, which is calculated after the deduction of withholding taxes on dividends. These are levied at different rates across Europe.
The new ETFs will list on Deutsche Boerse’s Xetra platform on Wednesday, followed by a cross-listing on the London Stock Exchange on Thursday. The total expense ratio for both funds will be 0.30 percent.
SPDR will also launch the SPDR FTSE UK All Share ETF this week, with the same timescale and on the same exchanges.