FTSE Group (FTSE), the award-winning index provider, announced today that it has created a custom benchmark to be used as the basis for the new Vanguard® High Dividend Yield Index Fund. The new fund offers both traditional investor shares and ETF shares.
Product issuers are increasingly using FTSE tradable indices as the basis for ETFs and other indexed derivative products. In North America, FTSE indices are already supporting a dozen ETFs in a range of asset classes and sectors on exchanges such as NYSE, NASDAQ, the Toronto Stock Exchange, and the ISE.
Jerry Moskowitz, Managing Director, FTSE Americas commented: “FTSE offers a range of innovative indices covering the all important asset classes, sectors, and high opportunity segments. Working with Vanguard to create this new custom benchmark helps to demonstrate FTSE’s skill in developing index solutions in line with investor and product issuer needs.”
The new Index consists of stocks that are characterized by higher-than-average dividend yields, and is drawn from the US component of the FTSE Global Equity Index Series (GEIS). Real estate investment trusts (REITs), whose income generally do not qualify for favorable tax treatment as qualified dividend income (QDI) are removed, as are stocks that have not paid a dividend during the previous 12 months. The remaining stocks are ranked by annual dividend yield and included in the target index until the cumulative market capitalization reaches 50% of the total market cap of this universe of stocks.
The index’s methodology holds the potential of durable high yields from solid companies, with lower weightings to companies that have high yields because of low or falling share prices. In addition, the index has the potential for greater tax efficiency because of low turnover and a high proportion of its dividends meeting the criteria for QDI.
The Vanguard High Dividend Yield ETF (AMEX: VYM), commences trading today.
More information about FTSE’s suite of index products is available at www.ftse.com
