Index providers Dow Jones Indexes and Stoxx have announced changes in the treatment of dividend payments in the calculation of the Dow Jones and Dow Jones Stoxx indices.
Index providers Dow Jones Indexes and Stoxx have announced changes in the treatment of dividend payments in the calculation of the Dow Jones and Dow Jones Stoxx indices. The methodology change affects all Dow Jones and Dow Jones Stoxx price return indices, while the total return version of the index series remains unchanged.
The new rule, which takes effect from the start of trading on Monday, December 22, considers the company’s regular dividend payment policy and declaration to determine whether cash dividends are included in the price indices.
Under the new rule, only extraordinary or special cash dividends are included in the indices. Previously, cash dividends with a gross amount equal to or greater than 10 per cent of the stocks’ closing price on the day before the effective date were included in the price index calculation in their entirety. Special dividends from non-operating income continue to be included in the index calculation.
No other methodological modifications are being made to the index families. The total return versions of all Dow Jones and Dow Jones Stoxx indices continue to include all types of dividend payments.
This change in index methodology is a result of recently increased equity price volatility. In the case where a company seeks to maintain its dividend payment policy despite declining stock prices, the new dividend policy is designed to ensure that the market performance of the Dow Jones and Dow Jones Stoxx price indices is reflected accurately.
