Dow Jones sees a market for the Index in the sudden spike in interest of companies issuing dividends with the new lower tax rates on these payments in the United States. The index – composed of 50 stocks derived from the Dow Jones US Total Market Index – will be launched on November 3, 2003, according to a news release.
Eligibility for inclusion will be based on a positive historical five-year dividend per share growth, an average five-year dividend payout percentage rate less than or equal to 60% and an annual average daily dollar trading volume greater than $1.5 million. Stocks that pass the initial battery of tests will then be ranked by dividend yield and the top 50 components of the Total Market Index will be selected for the Dividend Index.
Further, each investment’s weight in the Dividend Index will be based on the amount of its indicated dividend. The indicated annual dividends for all components are totaled and each component’s weight is equal to its dividend contribution.
After the initial launch of the dividend index, Dow Jones also anticipates licensing the first exchange-traded funds (ETF) based on the Index by the end of the year.
The Index will be reviewed on an annual basis in December. Components and weightings will be available starting November 3 on the Web site www.djindexes.com .