Dow Jones Indexes today announced that Charles Schwab has licensed the new Dow Jones U.S. Dividend 100 IndexSM to underlie the Schwab U.S. Dividend Equity ETF™, the latest addition to Schwab’s growing proprietary exchange-traded funds (ETFs) platform. This ETF was launched today by Schwab and will trade on the NYSE Arca.
The Dow Jones U.S. Dividend 100 Index was also launched today and is designed to measure the stock performance of high-dividend-yielding U.S. companies with a record of consistently paying dividends, selected for fundamental strength relative to their peers based on financial ratios.
“Schwab’s selection of the Dow Jones U.S. Dividend 100 Index as the underlying gauge for its new ETF is the latest in a series of licensing arrangements between our firms,” said Michael A. Petronella, President of Dow Jones Indexes. “By regularly working with market leaders such as Schwab, Dow Jones Indexes continues to burnish its brand as a company with a long track record of creating reliable, rules-based market-measurement tools.”
In January 2011, Schwab licensed the Dow Jones U.S. Mid-Cap Total Stock Market Index and the Dow Jones U.S. Select REIT Index to underlie its Schwab U.S. Mid-Cap ETF™ and Schwab U.S. REIT ETF™, respectively. And, in November 2009, Schwab licensed five size and style indexes within the Dow Jones U.S. Total Stock Market Index family to underlie the domestic portion of Schwab’s first-ever suite of ETFs.
With today’s announcement, Dow Jones Indexes has now licensed a total of 27 indexes to underlie ETFs so far in 2011 (versus 19 in the comparable year-ago period).
The Dow Jones U.S. Dividend 100 Index differs from many dividend-focused indexes in its method for component selection. The highest dividend yielding stocks from the list of eligible securities are evaluated and selected based on four fundamental-based characteristics: cash flow to total debt, return on equity, dividend yield and five-year dividend growth rate. The top-ranked stocks are included in the index. Only stocks that pass screens for size, liquidity and dividend history (10 consecutive years) are eligible for consideration.
The index is weighted according to a modified market capitalization approach whereby no single stock can represent more than 5% of the index and no single industry can represent more than 25%, as described in the index methodology.
The starting universe for the index is the Dow Jones U.S. Broad Market Index, which is comprised of the largest 2,500 U.S. equity securities based on float-adjusted market capitalization. Excluded from the index universe are REITs, master limited partnerships, preferred stocks and convertibles.
Changes to the index are made annually in March.
