About the Index
Dividends are an important component of total return of equities, accounting for a third of the total return of S&P 500 since 1926. Furthermore, S&P 500 linked derivatives such as options, futures and over-the-counter contracts may have dividend risk implied in them. The S&P 500 Dividend Index is designed to track the total dividends of the S&P 500 Index. It enables the investment community to hedge dividend risk or take a view on dividends for U.S. stocks, independent of price movement.
Index Methodology
The S&P 500 Dividend Index is simply a running total of dividend points of the S&P 500. Index dividend points of S&P 500 are dividends paid by index constituents expressed in terms of the level of S&P 500. The dividend points of the S&P 500 is 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 total dividend value is calculated as the sum of the dividends per share multiplied by the free-float index shares outstanding for all constituents of the index which have a dividend going ex on that date.
The index is reset to zero following 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.
The index tracks only ordinary cash dividends that enter the S&P 500 total return index.
S&P 500 Dividend Index Mathematics
Historical YieldFrom December 1936 through March 2009 the average yield for the S&P 500 was 3.814% vs. 3.815% for December 2008. The current 12-month dividend yield is 3.42% vs. the 3.14 yield for December 2008. The yield is based on the cash dividends paid over the prior four quarters and the closing quarterly price.
Historical Total Return
From January 1926 through March 2009 the annualized total return for the S&P 500 was 9.51% per year vs. 9.69% for December 2008. The dividend component consists of 44.00% of the return vs. 43.27% for December 2008. The annualized return consists of both capital appreciation and dividends reinvested.