Dow Jones Indexes has licenced the Dow Jones High Yield 10 Total Return Index, a subset of the Dow Jones Industrial Average to ELEMENTS, a new exchange-traded notes platform. The ‘Dogs of the Dow’ ELEMENTS is issued by Deutsche Bank and starts trading at the NYSE Arca, 8 November, 2007.
The Dow Jones High Yield Select 10 Total Return Index measures the top ten companies in the Dow Jones Industrial Average based on indicated annual dividend yield, a strategy commonly referred to as the ‘Dogs of the Dow’ and which typically consists of holding these 10 Dow stocks for one year. Dividends are reinvested into the index and contribute to its overall level.
“Dow Jones Indexes adds transparency to the widely used ‘Dogs of the Dow’ strategy by applying a consistent index methodology and publishing monthly watch lists. Licensing this unique index as the basis for an ETN will give market participants broad and easy access to the performance of the top yielding components in the Dow Jones Industrial Average,” says Michael A. Petronella, president, Dow Jones Indexes.
The Dow Jones High Yield 10 Total Return Index is calculated using an equal-dollar weighted methodology. That means that each component stock is initially given equal weight in the index in December, after the components have been selected, and are allowed to change over the course of the year based on fluctuations in the stock prices.
A watch list for the indexes is published monthly to provide an indication of what stocks may be included in the Dow Jones High Yield Select 10 Total Return Index when it is rebalanced at the end of the year. Dividend yield for each component is calculated based on updated indicated annual dividend data and the closing prices at the last trading day of the previous month.