NEW YORK, Nov. 10, 2004 (PRIMEZONE) -- Dow Jones Indexes today announced that it is broadening the Dow Jones Select Dividend Index to 100 stocks from 50 currently, effective with the beginning of trading on Dec. 20, 2004.
The Dow Jones Select Dividend Index was introduced about one year ago. It measures the performance of dividend-paying stocks selected for their high yields, their track records of maintaining or increasing dividends over the past five years, and their capability of sustaining their current payouts in the coming year. So far in 2004, through Friday, Nov. 5, the index has gained 15.06%, compared to 5% to 6% for most U.S. broad-market indexes.
"The Dow Jones Select Dividend Index has proven to be very popular in this period of subdued stock-price appreciation," said John A. Prestbo, editor of Dow Jones Indexes. "Given that about 55% of the 1,617 companies in our Dow Jones U.S. Total Market Index pay a cash dividend, and that more companies are joining the trend or are increasing their existing payouts, we decided that doubling the number of stocks would do a better job of representing this type of equity investment."
Mr. Prestbo cited a study by the Markets Data Group of The Wall Street Journal that showed 139 U.S. companies declared initial dividends in the year ended Sept. 30, 2004, with the average payout being 10.6 cents a share. The same study also examined increased dividends in that period and found that 1,100 companies raised their payouts by an average of two cents a share. Dividend payments became more appealing to investors with last year's change in the U.S. tax law that reduces the federal tax rate on qualifying dividends to 15% from marginal ordinary-income rates that range up to 38.6%.
In addition to increasing the number of components, Dow Jones Indexes is strengthening the liquidity test that qualifying stocks must pass to be chosen for the Dow Jones Select Dividend Index. The new liquidity screen for new index components is a three-month average trading volume of 200,000 shares a day, compared to the previous screen of $1.5 million average dollar volume. Further, an index component will be removed for liquidity reasons at the annual review if the three-month average daily trading volume falls below 100,000 shares.
"The purpose of the Dow Jones Select Dividend Index is not simply to find the highest-yielding stocks in the market, but rather to represent that 'universe' of companies with generous but soundly based policies of delivering shareholder value in the form of regular cash distributions," Mr. Prestbo said. "To be truly representative, the index components must be investable by large, as well as small, investors."
No other methodological modifications are being made, Mr. Prestbo added. The index will continue to weight component stocks by the ratios of their individual payouts to the total distribution for all components. The annual review will be conducted in December, based on dividend yields as of Nov. 30. The enlarged list of components will be posted on the Dow Jones Indexes Web site, www.djindexes.com, as early as possible next month, Mr. Prestbo said. The revised methodology also is posted on the site.
Journalists may e-mail questions regarding this press release to PR-Indexes@dowjones.com or contact a member of the Dow Jones Indexes public relations group:
New York: Sybille A. Reitz, +1-212-597-5735,
Karishma Thakkar, +1-212-597-5718
Frankfurt: Simona Deckers, +49-69-97142894,
Nicole Wesch, +49-69-97142893
Note to Editors:
Dow Jones Indexes is a premier global provider of investable indexes, including the Dow Jones Averages, the Dow Jones Global Titans 50, the Dow Jones Asian Titans 50, the Dow Jones Sector Titans, the Dow Jones Country Titans Indexes and is co-owner of the Pan-European Dow Jones STOXX Indexes. Dow Jones Indexes is part of Dow Jones & Company, which publishes the world's most vital business and financial news and information.
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