New Calculation Method Highlights Dividends Paid by Components of the Iconic Dow Jones Industrial Average
LONDON (14 May, 2012) — Dow Jones Indexes today announced that a new “distributing” version of the Dow Jones Industrial Average has been licensed by Commerzbank and UniCredit to serve as the basis for Tracker Certificates listed on the Frankfurt and Stuttgart exchanges. The certificates will be marketed by UniCredit under the brand names “HypoVereinsbank onemarkets” in Germany and “UniCredit onemarkets” in Austria.
The new version of The Dow will be disseminated by market data vendors under the name Dow Jones Industrial Average (Distributing Index) and the suggested symbol DJINRD / DJINRDE. The index is calculated according to Dow Jones Indexes’ distributing methodology, which couples the performance of a base equity index, in this case The Dow, with a theoretical cash component designed to reflect the dividends paid by the base index’s constituents in a given six-month period. The index reflects distribution of the accumulated cash and resets the theoretical cash component to zero on a semi-annual basis. The index is calculated in USD and EUR.
Dow Jones Indexes first began calculating indexes according to its distributing methodology in September 2011. The approach was developed in part to satisfy investor interest in yield-based themes by offering greater visibility into dividends paid by index component companies.
“The Dow has been the barometer of the American stock market for more than 115 years,” said Michael A. Petronella, President, Dow Jones Indexes. “By calculating this renowned index in a manner that highlights the dividends paid by its component companies, we believe we are offering a uniquely attractive alternative for our clients.”
The recently published Dow Quarterly Dividend Activity Report highlighted that the index had a yield of 2.55% and a 5-year dividend growth rate of 14.86%, as of Q1 2012. The Dow’s component companies’ $107 billion expected dividend distribution for the 12 months beginning April 1, 2012, represents 37% of all indicated annual dividends (IAD) by U.S. companies as measured by the Dow Jones U.S. Index, a gauge that accounts for roughly 95% of the U.S. equity market. (IAD is a forward-looking measure defined as a company’s most recently paid quarterly dividend multiplied by four.)
First published on May 26, 1896, the Dow Jones Industrial Average represents large and well-known U.S. companies, covering all industries with the exception of Transportation and Utilities. Components are added and deleted on an as-needed basis. While stock selection is not governed by quantitative rules, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors. Maintaining adequate sector representation within the index is also a consideration in the selection process. The index is price weighted. For more information, visit www.djaverages.com.