NASDAQ Index Blog - Posts with tag of "Dividends"

on 7/23/2014

The NASDAQ Global Risk Managed Income Index is a rules-based, quantitatively enabled index designed to provide risk managed, globally diversified exposure to income-generating asset classes to produce a high yield for the risk taken. The Index consists of liquid, income-bearing exchange-traded funds (ETFs) and other exchange traded products across various asset classes to gain the diversified, risk managed exposure.

The First Trust ETF seeks to replicate, to the extent possible, the performance of the Index net of expenses. The investment strategy of the First Trust ETF is to invest in and hold constituent securities of the Index in the same proportion as they are reflected in the Index or securities intended to replicate the performance of the Index.

“NASDAQ’s suite of Dividend and Income indexes have long been standard benchmarks, and we are proud First Trust has launched a product on one of the most innovative income indexes in the market,” said Dave Gedeon, Managing Director, NASDAQ OMX Global Indexes. “NASDAQ’s partnership with Newfound Research has resulted in an expansion of income investing from the traditional to the technical.”

“We are pleased to partner with NASDAQ OMX Global Indexes and Newfound on a strategy that we believe provides a compelling income solution for Canadian investors,” said Fraser Howell, chief executive officer of FT Portfolios Canada Co. “In the current low yield environment where many investors and advisors actively hunt for the dual goals of income generation and risk mitigation, we feel our new First Trust ETF (TSX:ETP) may provide the flexibility to potentially achieve both objectives.”

For more information, contact:

Rob Hughes
Vice President, Sales and Business Development
NASDAQ OMX Global Indexes
Direct: +1 212 401 8987

Video: John Jacobs on Growth in the Dividend & Income Index Business By: John Jacobs
on 6/18/2014

John Jacobs, Executive Vice President, NASDAQ OMX Global Information Services, addresses the growth of Dividend & Income Index Strategies in the first installment of his video series.

Transcript: Since 2007, 2008, since the financial crisis, it’s been very difficult for institutional and individual investors to find yield. So dividend investing has a lot of advantages because it guarantees investors a yield on their portfolio instead of just relying on the performance of the stock, or the underlying stocks in the ETF. So with the acquisition of the Dividend Achievers suite of products, we can marry that with our income family of products and offer investors a suite of different indexes to use. The indexes are a basis for a variety of ETFs and other types of products and it’s another stepping stone for NASDAQ as we continue to build out our Global Index business, which has become multi-asset class and, as well, multi-different investment style.

The Future of Dividend Investing By: John Jacobs
on 12/11/2013

Searching for yield in unlikely places has been an effective strategy for investors looking to gain exposure outside of the classic reliable income sectors such as utilities, healthcare or consumer staples.   Social needs have a way of shaping investor demand; and as the ever-burgeoning population of retirees shifts from a growth mentality to an income philosophy, there are several innovative products that could very well shape the future of dividend investing. 

This year, investors were broadsided by rising interest rates.  Principal values of most fixed-income assets have exhibited volatility that we have not seen for decades. And while dividend-paying stocks briefly weakened, they are now back to all-time highs.  With earnings multiples on commonly held dividend stocks now stretched to historically high levels, where are investors turning to satisfy their cash-flow needs while steering clear from inevitable bull traps?

When looking at an investment opportunity to generate an income stream, investors should ask themselves whether that investment can maintain its principle value alongside the ability to grow its distributions over time.  In addition, performing due diligence on the level of volatility the investment has exhibited throughout history will offer a glimpse of what to expect in the event the economy takes a down turn.  

Dividend Growth Over Time

Dividends have accounted for over 40% of total returns over the last 80 years1.  And it has been shown that companies that grow their dividends over time will weather a rising rate environment, and can even thrive in its wake.  A great example of this would be to compare the current 10-year Treasury note yield to the yield on a basket of dividend growth stocks. 

This year we saw a tremendous rise in the 10-year Treasury note yield, which moved from a low of 1.6% to its current level of 2.5%. During that same time frame, the WisdomTree U.S. Dividend Growth Index (DGRW), a broadly diversified basket of dividend growth stocks, has maintained its yield of 2.00%.

If an investor can reasonably say that a basket of stocks will aggressively grow their dividends year-over-year for the next 10 years, the chances of maintaining purchasing power due to inflation are greatly enhanced.   In addition, now is still a great time to invest in dividend growth stocks since payout ratios (or the percentage of free cash flow that is returned to investors) are still very attractive when compared to forward earnings momentum.

Investors seeking a higher yield may consider the PowerShares High Yield Equity Dividend Achievers Portfolio (PEY), which is comprised of 50 stocks selected principally on the basis of dividend yield and consistent growth in dividends.  The current 30-day SEC yield on PEY is 3.53% and it has a larger emphasis on small and mid-cap dividend paying stocks.  Since there are many ways of calculating yield, the 30-day SEC yield is a method specified by the SEC to calculate yield on funds, which then must be posted by the fund provider to create an “apples to apple” figure for investors. PEY is overweight small and mid-cap stocks vis-à-vis a more natural / neutral market-cap weight.

Sector Dividend Investing

A more targeted theme investors might consider when trying to grow income over time would be an allocation to a specific sector, such as large-cap value technology stocks.  The First Trust NASDAQ Technology Dividend Index Fund (TDIV) is designed to include companies that are consistently paying and/or growing their dividends over time.  Many of these companies are currently trading at price/earnings multiples marginally smaller than the general market.   The current 30-day SEC yield of 2.90% from the 87 holdings in TDIV is more attractive when juxtaposed with DGRW’s more broadly diversified mix of 294 holdings.

With the majority of TDIV’s allocations outside interest-rate-sensitive equity themes, its constituents aren’t as dependent on debt issuance as other income sectors.  Investors may ultimately be better positioned to endure a rise in long-term interest rates, without borrowing costs eating into profitability. 

Often times sector investing can enhance returns by providing overweight allocation to a segment of the market that offers attractive growth and income potential.  To do this, investors would choose an index that maintains exposure to companies that are actively increasing their returns to shareholders. 

Dividend Investing Through Multiple Asset Classes

Targeted sector strategies aside, a multi-asset approach is another way for investors to gain exposure to a broadly diversified and liquid basket of income producers.  Their popularity is just beginning to gain momentum, with individual and institutional investors seeking a low-cost alternative to traditional balanced mutual fund strategies. 

Breaking the mold of traditional asset allocation, the First Trust Multi-Asset Diversified Income Fund (MDIV) embodies a colorful mix of income-producing assets that offers an attractive yield and opportunity for growth of invested capital.  Its asset allocation framework is designed around five core sleeves, which are currently allocated to: 25% dividend equities, 15% high yield bonds, 20% master limited partnerships, 20% preferred stocks and 20% REITs.  With a 30-day SEC yield of 6.85%, this ETF is allocated to some of the highest dividend paying sectors of the market. 

The inherent feature that is most important to this type of multi-asset strategy has to be its performance in a bifurcated market environment.  As one asset class can often become extended or even overvalued, owning a diversified mix can prove to be a pragmatic risk management tool in a volatile market.

And yet another ETF in this category is the Guggenheim Multi-Asset Income ETF (CVY), which incorporates closed-end funds and an overweight allocation to dividend-paying equities in its mix. 


Part of any successful portfolio management approach is the abundance of choices available to reach a stated goal.  The more tools an investor possesses, the higher the probability their goal will ultimately be achieved.  Although the basic philosophy of dividend investing will always remain the same, the emergence of innovative strategies presents investors with robust value propositions in virtually any market environment.

1 Source: Ibbotson, as of December 31, 2010.

NASDAQ® is a registered trademark of The NASDAQ OMX Group, Inc. (which collectively with its affiliates is referred to as “NASDAQ OMX”) and is licensed for use by WisdomTree U.S. Dividend Growth Index (DGRW), PowerShares High Yield Equity Dividend Achievers Portfolio (PEY), First Trust Multi-Asset Diversified Income Fund (MDIV), First Trust NASDAQ Technology Dividend Index Fund (TDIV), Guggenheim Multi-Asset Income ETF (CVY). DGRW, PEY, TDIV, MDIV and CVY have not been passed on by NASDAQ OMX as to its legality or suitability, and it is not issued or sold by NASDAQ OMX. NASDAQ OMX makes no warranties and bears no liability with respect to the DGRW, PEY, TDIV, MDIV and CVY. 

Nothing contained herein should be construed as investment advice from NASDDAQ OMX, either on behalf of a particular financial product or an overall investment strategy. NASDAQ OMX makes no recommendation to buy or sell any financial product or any representation about the financial condition of any company or fund. Investors should undertake their own due diligence and carefully evaluate financial products before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.

How are Macro Economic Factors Affecting Fund Flows and Benchmark Selection? Updated: 6/28/2013

In this uncertain rate environment, how do you navigate your investment strategies? Do you look for additional yield or lower risk? Do you look for government-backed securities or turn to gold? How do Dividends and Fixed Income strategies play into your investment approach? Join leading ETP expert Deborah Fuhr, Partner and Co-founder of ETFGI, and David Krein, Head of Index Research at NASDAQ OMX, as they discuss how investors are dealing with the potential rate changes, and provide the latest research on fund flows.

Watch the webcast here.

How Rising Interest Rates Affect Your Income Portfolio Updated: 6/25/2013

By David Fabian, NASDAQ OMX Global Indexes Contributor

It has been quite a ride in both the stock and bond markets as the Federal Reserve reiterated its zero interest rate policy and bond buying programs through mid-2014. This announcement and subsequent Q&A session with Fed Chairman Ben Bernanke sent stocks, bonds, and commodities downward as investors reacted to the fears of rising interest rates.  In fact, there was virtually nowhere to hide for income investors as just about every yield producing asset class was bathed in red ink and the 10-Year Treasury Yield Index ($TNX) spiked to new year-to-date highs of 2.4% on Thursday. 

Investors that had been used to conservative returns and low volatility are starting to get nervous about the prospects for their income generating assets moving forward.  That data is confirmed by asset flows from Index Universe which list the iShares TIPS Bond Fund (TIP), iShares Investment Grade Bond Fund (LQD), SPDR Barclays High Yield Bond Fund (JNK), and iShares High Yield Bond Fund (HYG) as four of their top 10 ETFs for asset redemptions in 2013. 

Read the entire article here.

NASDAQ OMX Global Indexes for Pension Consultants Updated: 6/14/2013

Are you a pension consultant looking for a viable alternative to the expensive, well-known industry benchmarks? What if you could provide a new way of saving your clients money without sacrificing reliability and accuracy? We’ve been talking to managers and custodians across the globe and the sentiment is the same — show us some lower cost alternatives that we can trust and help bring fee transparency to investors.

We have done just that. We’ve used our world-renown INET technology to make our reliable, objective and transparent indexes more affordable. Check out our NASDAQ Global Index Family, NASDAQ Dividend and Income Family and the NASDAQ Commodity Index Family and see how they compare to industry incumbents.

Click here for more information specifically for Pension Consultants and learn how NASDAQ OMX is yet again using cutting-edge technology to offer high-quality, lower-cost solutions that are reshaping the market.

NASDAQ® and NASDAQ® are registered trademarks of The NASDAQ Group, Inc. The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Neither The NASDAQ Group, Inc. nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding NASDAQ-listed companies or NASDAQ proprietary indexes are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.

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