Morningstar Inc. has launched an index that allows income-focused investors to prioritize dividend yield.
The investment research company has created the
Morningstar Dividend Leaders Index, a diversified portfolio of the 100
highest yielding stocks. The index will reflect companies that have a
consistent history of paying dividends and the ability to sustain their
dividends. The index favors companies that are expected to have enough
future earnings to cover their dividend costs.
In a related development, Morningstar announced that
First Trust Advisors L.P., an investment advisory firm in Lisle, Ill.,
has licensed the index for the purpose of using it to launch an
exchange-traded fund.
"Generating income is an important, yet overlooked,
component of total return," said Don Phillips, managing director of
Morningstar. "After a prolonged infatuation with capital appreciation,
investors, especially those nearing retirement, are now more focused on
income-producing investments."
The new index will use MDL as a ticker symbol. It
will be benchmarked against the Morningstar Dividend Composite Index,
another new index that contains all dividend-paying stocks in the
Morningstar US MarketSM Index that meet the dividend consistency and
sustainability screens. The Dividend Leaders Index consists of the 100
highest yielding stocks in the Dividend Composite Index, according to
Morningstar.
"Our index is unique because we weight stocks in
proportion to the dividends available to investors," said Sanjay Arya,
director of Morningstar Indexes. "Both the amount of the dividend paid
by a company and the size of the company are given due importance.
Using available dividends helps avoid the investment capacity problems
some other indexes face."