"Mergent Broad Dividend Achievers Index"
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The Mergent Broad Dividend Achievers™ Index tracks the companies on the Mergent list of Dividend Achievers. A company must be incorporated in the United States or its territories, trade on the New York Stock Exchange, the American Stock Exchange or the NASDAQ stock exchange. Most importantly, it must have increased its annual dividends for the last 10 or more years in a row.
Therefore, these companies have a long history of not just paying stock dividends to shareholders, but of raising the dividend funds every year.
It uses a modified market capitalization weighting. That means that no one company may comprise more than 5% of the index. This is to comply with SEC rules.
For the 10 year period ending with November 30, 2006 the Mergent Broad Dividend Achievers™ Index beat the S and P 500 index by an average of 1.5% per year, and with reduced risk (in the financial sense that means less price volatility). The average 10-year compound annual growth rate for the Broad Dividend Achievers Index was 12.1% as of 2005.
The Mergent Broad index is calculated by the American Stock Exchange (AMEX) and listed under the ticker symbol DAA.
There're currently 331 companies in the index, and it is the most diversified of the Mergent Dividend Achiever indexes.
The top 10 Mergent Broad Dividend Achievers holdings are:
- General Electric
- Bank of America
- Proctor and Gamble
- American International Group
- Johnson and Johnson
From January 1, 1983 through February 28, 2007 the total return of $10,000 invested in the S and P 500 was $181,948. The total return of the Mergent Broad Dividend Achievers Index was $217,597. This is just over a 19% difference, over 24 years. This helps to validate my contention that focusing on dividends is better than focusing on growth, not only for the greater income but also for the greater growth.
Mergent doesn't give the figures, but it's probably fair to assume that the companies that continually increase their dividends every year pay a higher amount of dividends than the S and P 500 on average, so a portfolio of the Broad index would also have paid out greater income.
They added 35 companies to the Broad Index in February 2007, while removing 21, for a net increase of 14 companies. 10 of the removed companies were acquired. 2 did not meet the liquidity requirements. 9 failed to increase their 2006 annual dividends.
Some of the best known companies added include: Cardinal Health, Nordstrom, Kinder Morgan Energy Partners LP and Lehman Brothers Holdings.
PowerShares Dividend Achievers™ Portfolio
This is an exchange traded fund that holds the stocks of the Mergent Broad Dividend Achievers Index. This EFT trades on the American Stock Exchange under the ticker symbol PFM. Its fund inception date is September 15, 2005. It uses a modified market cap (no one company can comprise over 5% of the entire fund) weighting method. It is rebalanced quarterly.
BlackRock Dividend Achievers Trust
This (BDV) is a closed end mutual fund that buys substantially all but not less than 80% of its holdings from companies in the Mergent Broad Index of Dividend Achievers. It takes 60 to 80 of the top companies from that index. It opened on the New York Stock Exchange December 19, 2003.
Since it does not exactly track the Mergent Broad Dividend Achievers Index, its Net Asset Value may be more or less than the Broad Dividend Achievers™ Index.
BlackRock Strategic Dividend Achievers™ Trust
This (ticker symbol BDJ) is a closed-end mutual fund that also holds at least 80% of its total investments in companies included in Mergent's Dividend Achievers. The difference in the two funds is that BDJ goes for small and mid-cap dividend achievers. BlackRock Strategic Dividend Achievers™ Trust trades on the New York Stock Exchange, beginning March 26, 2004.
BlackRock Enhanced Dividend Achievers™ Trust
This is a closed-end mutual fund that holds mainly stocks from the Mergent Broad Dividend Achievers Index, but it seeks to earn more income by writing covered calls on the stocks it holds. If those stocks prices go up far enough, the stocks would get called out and the fund would be forced to sell them, generating capital gains and greater transaction costs. It may well buy back the calls it sold before this happens, but that means a loss of money on the trade. It also writes puts to make more money. These strategies can certainly make money, but the fund performance will not track the Broad Dividend Achievers Index. It began trading on the New York Stock Exchange on August 26, 2005, under the ticker symbol BDJ.
An index that applies additional liquidity criteria to the Mergent Broad Dividend Achievers Index is the Mergent Dividend Achievers Select Index.
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