*This content is brought to you by CoreShares, Africaâs premier passive investment management business
Introducing Global Dividend Aristocrats
Accessing a select group of global âcash cowsâ
In 1970, the Boston Consulting Group introduced the concept of a âCash Cowâ as part of its âgrowth share matrixâ. A cash cow is a metaphor for a dairy cow that reliably produces milk over its life. After the initial capital outlay, the cow continues to produce milk for many years to come.
The S&P Dividend Aristocrats Index Family aims at providing Investors with access to these âCash Cowâ companies. This strategy has been successful as it is based on a simple, intuitive and timeless investment strategy of selecting companies with a strong track record of growing dividends. ETFs globally following this strategy have raised over ZAR 300 Bn in assets.
S&P DJI in collaboration with CoreShares has launched the S&P Global Dividend Aristocrats Blend Index (Custom). Investors who select this strategy would do so to seek the below characteristics.
- Quality companies that are defensive in nature
Dividend Aristocrats tend to be companies that endure difficult market and economic environments relatively well as they usually have less cyclical earnings and are cash generative. The persistent annual growth in their dividends suggests good financial strength, lower levels of debt and a disciplined management team. A good example of one such company that will be in the index is McDonaldâs. The company has consistently grown their dividend since 1977.
- Relative stability in volatile markets
Although still an equity strategy and therefore risky by nature, the strategy should provide better protection to investors relative to Market Cap weighted indexes. The table below illustrates the indexâs relative performance. Not only does the index achieve a higher risk-adjusted return, but it also captures more of the upside than it does its downside.
- Global diversification across regions and constituents
The index is invested in more than 275 shares across 24 countries. The geographical allocation of the countries will match their respective allocations in the S&P Global Broad Market Index. The index is well diversified with no excessive exposure to any single stock. The Top 20 shares currently only make up 20.5% of the fund.
A dependable strategy over time
The largest region in the index is the S&P 500 Dividend Aristocrats Index based in the USA, which accounts for 51% of the fund. This index is also the longest live track record going back to May 2005. The S&P 500 version has produced enhanced risk adjusted returns and improved risk management.
Who is this for?
Such an index strategy is well suited for those clients who wish to diversify into a select group of global cash cow companies. These quality companies have a strong track record of delivering consistent and growing dividends through various economic cycles.
CoreShares will be listing the first global equity dividend ETF (Sharecode: GLODIV) on 22 February 2018 at a management fee of 0.35% and with an expected TER of 0.60%.
