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Standard & Poor’s launches S&P 500 Dividend Index

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Standard & Poor’s has launched the S&P 500 Dividend Index, enabling the investment community to hedge or take a view on dividends for US stocks, independent of price movement.

Standard & Poor’s has launched the S&P 500 Dividend Index, enabling the investment community to hedge or take a view on dividends for US stocks, independent of price movement.

Standard & Poor’s says it has become the first major index provider in the US to offer an index that provides pure dividend exposure.
 
The index is designed to track the total dividends of the constituents of the closely followed S&P 500 Index. The index provides investors with the ability to hedge against the dividend risk that is implicit in the value of S&P 500 linked derivatives. It also provides a benchmark to execute strategies on realized versus implied dividends.
 
‘Dividends are an important component of the total return on equities, accounting for a substantial part of the total return of the S&P 500,’ says David Blitzer, managing director and chairman of the index committee at Standard & Poor’s. ‘As a result, dividends are a significant factor in evaluating derivatives based on the S&P 500. With the launch of the S&P 500 Dividend Index, investors can hedge the dividend risk associated with S&P 500 linked derivatives.’
 
The S&P 500 Dividend Index is a running total of dividend points of the S&P 500. Index dividend points of the S&P 500 are dividends paid by index constituents expressed in terms of the level of S&P 500, calculated on any given day as the total dividend value for all of the S&P 500 constituents of the index divided by the index divisor.
 
The index is reset to zero after the close on the third Friday of the last month of every calendar quarter to coincide with futures and options expirations. Thus the index measures the total dividend points of the S&P 500 since the previous reset date.

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