S&P ESG Excessive Yield Dividend Aristocrats Index – Including a Layer of Sustainability by way of ESG Screening – Indexology® Weblog

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S&P ESG Excessive Yield Dividend Aristocrats Index – Including a Layer of Sustainability by way of ESG Screening

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Excessive-dividend-yielding shares have been prevalent in 2022, as rising rates of interest have put downward strain on lengthy period property. On the similar time, market contributors are more and more in search of to align investments with their private and societal values. The S&P ESG Excessive Yield Dividend Aristocrats® Index could also be a technique that checks each of those packing containers. Launched in March 2021, this index strives to realize low monitoring error and comparable dividend yield to the S&P Excessive Yield Dividend Aristocrats Index whereas incorporating significant ESG enchancment.

Combining Dividend Aristocrats and ESG Methodology

The S&P ESG Excessive Yield Dividend Aristocrats Index combines the S&P Dividend Aristocrats methodology with a sustainability overlay. To qualify for the index, an organization should first have persistently elevated dividends yearly for a minimum of 20 years. This preliminary filter tilts the index towards choosing higher-quality corporations, for the reason that capability to persistently develop dividends over an extended time period will be a sign of monetary energy, self-discipline and sturdy incomes energy.

Subsequent, a number of ESG screens are utilized. The index excludes corporations within the lowest quartile of S&P DJI ESG Scores. Extra ESG exclusion evaluations are carried out quarterly based mostly on enterprise actions, in addition to United Nations World Compact (UNGC) breaches. These ESG screens serve to reinforce the already stringent {qualifications} of the Dividend Aristocrats methodology.


Since January 2011, the S&P ESG Excessive Yield Dividend Aristocrats Index has generated a 12.92% annualized return versus 11.87% for the S&P 1500TM, whereas exhibiting much less volatility.

Not too long ago, the outperformance of the S&P ESG Excessive Yield Dividend Aristocrats Index versus the S&P 1500 has been much more pronounced. Yr-to-date, the S&P ESG Excessive Yield Dividend Aristocrats Index has outperformed the benchmark by 15.25%. One motive for that is that high-yielding indices, primarily via their decrease durations, supplied larger safety in opposition to quickly rising rates of interest in comparison with the benchmark.

Comparability of S&P DJI ESG Scores and Dividend Yields

Exhibit 3 reveals that the S&P ESG Excessive Yield Dividend Aristocrats Index supplied notable S&P DJI ESG Rating enchancment over the S&P Excessive Yield Dividend Aristocrats Index. The S&P DJI ESG Rating improved by 11 factors per yr on common, revealing an annual improve of over 20%.

The S&P ESG Excessive Yield Dividend Aristocrats Index and S&P Excessive Yield Dividend Aristocrats Index have had comparable yields traditionally, and each have held a major yield benefit over the S&P 1500 (see Exhibit 4). Over the interval examined, the typical annual dividend yields for the S&P ESG Excessive Yield Dividend Aristocrats Index, S&P Excessive Yield Dividend Aristocrats Index and S&P 1500 had been 2.73%, 2.88% and 1.84%, respectively.

Exhibit 5 reveals the typical year-over-year annual proportion dividend progress fee for present S&P ESG Excessive Yield Dividend Aristocrats Index constituents. The typical year-over-year dividend progress fee over the previous 20 years was 11.26%, far surpassing the typical year-over-year U.S. CPI fee of two.35% over the identical interval.


For market contributors who’re in search of high-quality corporations that align with their private values, in addition to a historical past of steady and engaging dividend funds, the S&P ESG Excessive Yield Dividend Aristocrats Index could also be an choice to think about.

The posts on this weblog are opinions, not recommendation. Please learn our Disclaimers.

Diversification Past Borders

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Tutorial theorists usually assert the choice of the place to take a position as extra necessary than the choice of what to take a position in. Research counsel that as much as 90% of funding returns are attributable to location.

Regional fairness indices symbolize totally different mixtures of geographic and sector publicity. These variations can doubtlessly enhance the diversification advantages accessible when combining indices. We examine the underlying sector and geographical income exposures of two S&P DJI regional indices and present that using mixtures of fairness indices might enhance an investor’s danger/return potential, in addition to scale back dwelling bias (an anomaly whereby asset allocators chubby their home inventory market).

What Is the S&P 500®?

Broadly thought of the first gauge of the U.S. large-cap inventory market, the S&P 500 is a float-adjusted, market-capitalization-weighted index that displays 500 of the biggest, most well-known corporations domiciled within the U.S. The index incorporates a variety of inclusion standards, together with a profitability display. The S&P 500 represents over 80% of the whole U.S. market capitalization as measured by the S&P Whole Market Index (TMI). Lots of the index’s constituents have a significant international presence, with revenues generated in a variety of overseas international locations. Due to this fact, regardless of its U.S. focus, the S&P 500 gives perception into corporations with a various income base throughout geographies and sectors.

Europe versus the U.S. – Variations in Publicity

The S&P Europe 350® is a European-centric counterpart to the S&P 500. The index focuses on the biggest blue-chip corporations domiciled in 16 European international locations, weighted by float-adjusted market capitalization based mostly on a variety of inclusion standards.

We use FactSet Geographic Income Publicity (GeoRev™) knowledge, adjusted for sales-weighted publicity, to grasp the geographic unfold of constituent revenues for each the S&P 500 and the S&P Europe 350. For instance, corporations within the S&P 500 generate round 70% of their income within the U.S., whereas corporations inside the S&P Europe 350 generate solely 24% of their income from the identical location.

Exhibit 1 compares the S&P 500 and the S&P Europe 350. It reveals that the revenues of the S&P Europe 350 have a larger tilt away from the U.S. and towards Europe than the S&P 500. Due to this fact, a technique combining the 2 indices might result in a extra numerous geographic income publicity.

In follow, industries should not distributed evenly throughout geographies. Exhibit 2 reveals that the S&P Europe 350 has important weight in Industrials and Well being Care, reflecting the robust franchises in these sectors in international locations similar to Germany and France for Industrials and the U.Okay. for Well being Care. The S&P 500 has the next weight in Data Expertise and Communication Companies than the European index.

Exhibit 3 gives the annualized whole return and the return/danger ratios for varied hypothetical mixtures of the S&P 500 and the S&P Europe 350 over totally different durations ending in September 2022. Exhibit 4 attracts the environment friendly frontier for various mixtures of S&P Europe 350 and S&P 500 allocations. The outcomes present that over longer time durations, a hypothetical mixture of European and U.S. indices supplied the next return and extra favorable danger profile than the S&P Europe 350 funding alone, maybe reflecting the advantages of diversification.


The posts on this weblog are opinions, not recommendation. Please learn our Disclaimers.

Commodities Challenged by Slowing World Development in November

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Fiona Boal

Head of Commodities and Actual Belongings

S&P Dow Jones Indices

Commodities, represented by the broad-based S&P GSCI, fell 1.7% in November on the again of weak spot within the petroleum and grains complexes. World commodities markets had been notably hit this month by worries over uncommon demonstrations in China in opposition to COVID-19 curbs, with oil and grains falling to multi-month lows and safe-haven gold rising. After 11 months, the S&P GSCI was up 27.8% YTD, defying greater rates of interest and rising fears of a chronic international financial slowdown.

The S&P GSCI All Crude has misplaced over a 3rd of its worth since peaking in early March (and giving up all positive aspects following the Russia-Ukraine battle); it is likely to be mentioned that oil costs are nodding in settlement with Treasury yields concerning an approaching financial slowdown. Within the petroleum advanced, a comparatively tight international provide image is competing with fears of an financial slowdown, a powerful U.S. greenback, authorities intervention to deal with skyrocketing retail vitality costs and indicators that vitality customers have taken steps to restrict consumption. A drop in monetary market participation within the main oil by-product markets has contributed to greater ranges of volatility. Market contributors might be eagerly awaiting a choice from EU member international locations concerning a value cap on Russian oil in early December, in addition to the Dec. 4, 2022, OPEC+ assembly to offer additional market route.

The S&P GSCI Grains declined 4.3% in November. Within the wheat market, low cost provides from Russia and elsewhere within the Black Sea area have saved a lid on costs. In distinction, soybeans had been supported by robust onshore soymeal demand in China. Argentina’s choice to present a short lived change fee for soy exporters till the tip of the yr will doubtless encourage a surge of exports in December. The S&P GSCI Cotton rose 20.4% in November however remained greater than 50% off its Could excessive. As attire gross sales contract, the collapse in cotton costs has been attributed to weaker Chinese language demand for cotton yarn, in what could possibly be an indication that core inflation has began to wane. The S&P GSCI Livestock was unchanged over the month.

Industrial metals have to date prevented the malaise brought on by Chinese language unrest, and expectations of a world slowdown as a substitute centered on steps introduced by China geared toward bailing out its struggling actual property sector. The S&P GSCI Industrial Metals rose 12.2% over the month, whereas nickel rallied 23.9%.

The S&P GSCI Gold gained 6.8% in November, ending a seven-month shedding streak. Indicators that the U.S. Fed may cut back the tempo of its rate of interest hikes, together with the continuing failures within the cryptocurrency ecosystem, helped help the so-called safe-haven asset.

To be taught extra in regards to the S&P GSCI and associated indices, try our Commodities Theme Web page.

The posts on this weblog are opinions, not recommendation. Please learn our Disclaimers.

Introducing the S&P Targeted Indices

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Fei Wang

Senior Analyst, U.S. Fairness Indices

S&P Dow Jones Indices

The expansion of index-based passive investing will be attributed to its transparency, effectivity and low price, together with lively administration shortcomings. Extra not too long ago, buoyed by the expansion of direct indexing, there has additionally been elevated demand for indices that choose a subset of constituents from underlying benchmarks and are designed to satisfy specified goals.

S&P DJI not too long ago launched the S&P Targeted Indices, that are designed with direct indexing use circumstances in thoughts.

S&P Targeted Indices Methodology Overview

The S&P Targeted Index Sequence at present includes three indices: S&P 500® Targeted 50 Index, S&P 500 Targeted 100 Index and S&P 500 Catholic Values Targeted 100 Index. The primary two are based mostly on the S&P 500, and the third index relies on the S&P 500 Catholic Values Index. The goal firm counts are 50, 100 and 100, respectively, and the indices are reconstituted yearly.

Every S&P Targeted Index is designed to have comparable World Trade Classification Normal (GICS®) business group weights as its underlying index, which has additionally resulted in comparable sector weights traditionally.

Exhibit 1 compares the GICS sector and business group weights of every S&P Targeted Index in opposition to its benchmark, as of Oct. 31, 2022. The outcomes had been much like their benchmarks; variations had been usually lower than 1%.

Again-Examined Efficiency Historical past

Maybe unsurprisingly, the similarity in sector and business group weights between the S&P Targeted Indices and their respective underlying indices contributed to comparable long-term efficiency, traditionally. For instance, solely 0.03% separated the annualized returns of the S&P 500 Targeted 50 Index and S&P 500 since December 2009.

Nevertheless, larger deviations had been noticed over shorter horizons. As an illustration, the S&P 500 Targeted 50 Index outperformed the S&P 500 by 2.36% YTD and by 2.99% over the previous 12 months.Exhibit 4 reveals that the S&P Targeted Indices’ development offered comparable turnover figures as their benchmarks, traditionally.

Because of this, the S&P Targeted Indices’ development could also be related for direct indexing managers trying to obtain comparable sector and business group weights as their respective underlying indices, however with fewer names.


The posts on this weblog are opinions, not recommendation. Please learn our Disclaimers.

Measuring Megatrends with Indices

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How do the S&P Kensho New Economies monitor long-term transformational traits? S&P DJI’s Anu Ganti and State Avenue World Advisors’ Dan Braz take a better have a look at how machine studying and a novel methodology could also be construed as a fusion of lively/passive in a rules-based framework.

The posts on this weblog are opinions, not recommendation. Please learn our Disclaimers.

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