Weighting companies by their one-year forecast dividend yield as opposed to market capitalisation

Transcription

1 Weighting companies by their one-year forecast dividend yield as opposed to market capitalisation MARKET DATA Indices Dividend Plus Johannesburg Stock Exchange

2 Ingeniously slotted within the Africa family of indices is the Dividend Plus, a yield weighted index designed to measure the performance of the top 30 high yielding companies within the universe of the Top 40 and Mid Cap, excluding real estate companies. Companies are liquidity screened to ensure that the index is tradable. The index is calculated in accordance with the Industry Classification (ICB), a global standard developed in partnership between FTSE Group and Dow Jones Indices. The index caters for both the South African and international markets and companies are weighted by one-year forecast dividend yield as opposed to market capitalisation. This creates an opportunity for diversification, since the Dividend Plus allows investors to capture the long-term effect of higher compounding returns and benefit from the lower correlations to traditional market capitalisation weighted indices. In addition, a dividend-based index is attractive because cash dividends are an objective measure of a company s value and profitability. The Dividend Plus is specifically designed for investment products such as index tracking funds, warrants and Exchange Traded Funds (ETFs). FTSE s unique methodology means that the constituents are liquid, tradable and of a relevant market size, whilst the free float adjustment ensures that only the investable opportunity set is included within the index. Dividend Plus Methodology Review universe At review the universe will comprise of constituents from the Top 40 and Mid Cap indices, excluding property companies where property companies are defined as those belonging to the Real Estate sector, 8730 under the ICB. data elements All data elements will be inherited from the indices. The dividend yield data will be based on the one-year dividends per share forecast/estimates (excluding capital repayments and special dividends) sourced from McGregor BFA. To be able to rank the review universe the one-year dividends per share forecast/estimates are divided by the underlying stock price at the review cut-off date. The data will be obtained from the data provider on the cut-off date of the periodic review. In cases where no forecast exists for a current constituent, it will be removed from the index. Periodic review of constituents The index will be reviewed semi-annually in June and December as part of the quarterly index review. The semi-annual reviews will use data based on the close of trading on the Friday after the first Friday of June and December. 2

3 The semi-annual reviews will be implemented in line with the Africa Series after the close of trading on the third Friday of June and December. To prevent a large number of constituent changes a maximum limit of 5 additions and 5 deletions are used at each periodic review. The index is subject to a liquidity test of R50 million per day. Constituents that prevent the index from trading R50 million within a trading day are excluded from the index. Where this leads to more than 5 constituent changes, the liquidity rule will take precedence. Calculation methodology Each of the 30 index constituents are weighted within the index at review by their forecast/estimate one year dividend yields. This constitutes the dividend yield (DY) factor for each constituent. The dividend yield factor is applied to the investable market capitalisation of each stock to either increase or reduce the stocks weight within the index. This factor will remain constant until the next semi-annual review (but see mergers below). Calculation frequency The Dividend Plus will be calculated in real time, every 15 seconds. A total return index will be calculated on an end-of-day basis. Main calculation currency The index will be calculated and published in Rands only. Intra-review changes Additions to the index series will only be applied at the next periodic review. Intra-review changes will be in line with the underlying All Share. A constituent will be removed from the Dividend Plus if it is also removed from the underlying All Share. If a constituent is acquired by a non-constituent, the company will be removed from the Dividend Plus. Where two index constituents merge, or one index constituent is acquired by another constituent, the factor that is applied to the investable market capitalisation is adjusted so that the new entity remains the same weight within the index as the combined remerged index weights. If an index constituent has a complex reorganisation or demerger, the newly spun-off company will remain eligible for inclusion into the index as long as it remains a constituent of the All Share. The new spun-off company will retain the same factor as its parent company until the next semi-annual review. Information a transparent matrix Launch 21 August 2006 Base Date 31 December 2001 Investability Screen Currency Rules Free float and liquidity ZAR 3

4 Tracking your index Since the Dividend Plus index follows the familiar rules for index construction; it makes it easy for local and international professionals to understand and track the index. With the JSE overseeing the index on the local front, help is always at hand for local index users. Daily data services useful links in the chain The following data product files are available for the Dividend Plus : Live Data Service This service provides subscribers with the intra-day index values (Real-time index calculated every 15 seconds) via the data feed. End-of-day Data Products This service provides subscribers with the following end-of-day data files which are produced in a flat file format and are available for download directly from the JSE via File Transfer Protocol (FTP). Valuation Data Service This service provides subscribers with a file containing index level data. It provides the end-of-day capital and total return index values, the index code, index market capitalisation and number of constituents. The file also contains information on the (XD Adjustment) the ex dividend adjustment (XD Adjustment) for the day as well as the XD adjustment for the year-todate, along with the actual dividend yield of the index. > > Constituent Data Service This service provides subscribers with a file which contains information on all the index constituents, inter alia, the constituent name, the ISIN and exchange code, the closing price, the total market capitalisation, the investable market capitalisation (the total market cap adjusted for free float), the number of shares in issue and the percentage weight of the constituent in the index. > > Tracker Data Service This service provides subscribers with a file highlighting corporate actions and constituent changes that will be implemented that evening, effective for open the following trading day. The service is designed to give users forward notice of corporate events and index changes, allowing them to plan for and implement any changes to their own investment products in a timely fashion. The file is split into three sections. First section Level Data, contains index changes to the number of constituents in the index, the market capitalisation of the index, index divisor, as well as the XD adjustment figure. Second section Company Level Data, contains changes to the industry classification of the company, the closing shares in issue and the new shares in issue, the closing investability weighting used in the index calculation and the new investability weighting, and changes to the closing price. There is also an indication of whether a secondary line related to the company has been included in the calculation, and further amendment notes to give details of any housekeeping changes such as changes to the constituent name, a constituent addition or deletion, or a change to the ISIN. Corporate actions such as capital repayments, capitalisation issues, rights issues, subdivisions, complex corporate actions, consolidations and share changes will also be detailed in notes for the service user. Third section Dividend Information at Constituent Level, contains the ex-dividend date, the dividend amount, the ISO currency code for dividend payment, the XD adjusted values, and a FTSE dividend code to indicate the type of dividend issued (e.g. final dividend or interim dividend). 4

5 Dividend Plus Fact Sheet Series Headline Indices All Share Industry Indices Secondary Market Indices Specialist Indices Indices All Share ** Top 40 ** Mid Cap Small Cap Fledgling STYLE Value Growth Sector Indices Resources 20 Industrial 25 Financial 15 Financial& Industrial30 Sub-sector Indices* Gold Mining AltX Development Capital Market Venture Capital Market AltX 15 Financials Industrials Property Unit Trust Property Loan Stock Industrial SA Resources SA Listed Property Industrials Resources Financials Dividend Plus Tradable **Capped and Shareholder Weighted Indices are also available. * Only 5 sub-sector indices that make up the mining sector are calculated. Note: Africa Series also includes the Namibia Indices. RAFI 40 Dividend Plus Performance (ZAR total return) level May 06 Jun 06 Jul 06 Aug 06 Sep 06 Oct 06 Nov 06 Dec 06 Jan 07 Feb 07 Mar 07 Apr 07 May 07 Jun 07 Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 5

6 Dividend Plus Fact Sheet Dividend Plus INDEX: TOP 10 CONSTITUENTS Rank* Security Sector Net Market Cap (ZARmn) Div Plus Weight (%) % Weighting within Sector 1 JD Group General Retailers 35, % 19.09% 2 African Bank Invest General Financial 65, % 56.67% 3 Telkom Fixed Line Telecommunications 37, % % 4 Woolworths Holdings General Retailers 28, % 15.53% 5 Foschini General Retailers 31, % 17.33% 6 Lewis Group General Retailers 32, % 17.86% 7 Imperial Holdings Industrial Transportation 21, % % 8 Nampak General Industrials 24, % 57.67% 9 Investec PLC General Financial 24, % 21.59% 10 ArcelorMittal South Africa Ltd Industrial Metals 58, % % Total 362, % Dividend Plus INDEX: SECTOR BREAKDOWN ICB Code Sector Number of Constituents Net Market Cap (ZARmn) Div Plus 530 Oil and Gas % 4530 Health Care Equipment & Services % 5550 Media % 1730 Forestry & Paper % 1750 Industrial Metals 1 58, % 1770 Mining 3 136, % 2350 Construction&Materials 1 26, % 2720 General Industrials 2 43, % 2730 Electronic & Electrical Equipment 1 19, % 2770 Industrial Transportation 1 21, % 2790 Support Services % 3530 Beverages % 3570 Food Producers 2 41, % 3720 Household Goods % 3760 Personal Goods % 5330 Food & Drug Retailers 1 18, % 5370 General Retailers 6 184, % 6530 Fixed Line Telecommunications 1 37, % 6570 Mobile Telecommunications 1 19, % 8350 Banks 4 90, % 8570 Life Insurance 3 71, % 8730 Real Estate % 8770 General Financial 3 115, % 885,

7 Dividend Plus INDEX: PORTFOLIO CHARACTERISTICS Attribute Value Number of Constituents 30 Net Market Cap (ZARmn) 885,001 Company Size: (Adjusted ZARmn) Average 29,500 Largest 65,420 Smallest 17,098 Median 25,041 Weight Largest Company (%) 7.39% Top 10 Holdings (% Net Market Cap Share) 40.94% Source: JSE. Data as at Feb 29, *Constituents ranked by 1 year forward dividend yield. For additional information contact: JSE Market Data mdclients@jse.co.za DISCLAIMER: FTSE is a trade mark of the London Stock Exchange Group companies, JSE a trade mark of JSE Limited and both are used by FTSE Limited ( FTSE ) under licence. The Dividend Plus is calculated by FTSE in conjunction with the JSE. Neither FTSE or the JSE sponsor, endorse or promote this product and are not in any way connected to it and does not accept any liability. All intellectual property rights in the index values and constituent list vest in FTSE and the JSE. The JSE has obtained full licence from FTSE to use such intellectual property rights in the creation of this product Compiled: April