We take an in-depth look at the S&P 500 Low Volatility High Dividend Index, examining how the simple, two-step constituent screening methodology captures the benefit of high dividend and low volatility strategies to achieve higher dividend yield and better risk-adjusted returns than other S&P Dow Jones Dividend Indices that use multiple dividend and fundamental quality screens.
• The low volatility screen acted as a quality measure to avoid high-yield stocks with sharp price drops and captured the low volatility factor for the S&P 500 Low Volatility High Dividend Index.
• The S&P 500 Low Volatility High Dividend Index historically delivered a higher absolute and risk-adjusted return than the S&P 500 from December 1990 to February 2019.
• The index outperformed the S&P 500 73% of the time in down markets and underperformed 61% of the time in up markets. However, the level of outperformance in down markets was more pronounced than the level of underperformance in up markets.
• Compared with other S&P Dow Jones Dividend Indices in the U.S., the S&P 500 Low Volatility High Dividend Index achieved higher dividend yield and risk-adjusted returns historically.