US Quality Dividend Payers Index

Return-oriented investing: quality stocks from the US paying high dividends

 

Open End PERLES on the UBS US Quality Dividend Payers Index

Proven strategy for success

Dividend and old-fashioned – not so! Dividend stocks have long since shed their boring image. Rightly so: analyses of historical data show that, over the long term, profit distributions make a major contribution to the overall performance of an equity investment. High dividend yields are nevertheless not always a seal of quality. A high yield may also be due to losses resulting from falling stock prices. So when making a selection, it is essential to pay attention to the required quality of the companies. The UBS Global Quality Dividend Payers Index, which was launched in 2012, demonstrates what a profitable selection could look like. Since its introduction, the 30 selected value stocks have consistently outperformed their benchmark, MSCI World. At the end of 2019, the global strategy for success was then transferred to the US market. From this strategy, which is aligned and optimized with the large-cap universe, the UBS US Quality Dividend Payers Index has derived.

Professional dividend strategy

The US and dividends have always been a good match. As early as the 1930s the US economist Benjamin Graham, regarded as the forefather of value investing, pointed out the importance of profit distribution as a selection criterion for equity investments. Of course, not every private investor has the time or the resources to filter out suitable equities from the enormous Wall Street universe. The UBS US Quality Dividend Payers Index provides a solution. The new strategy barometer uses an innovative multi-factor approach to maximize the potential return on an investment. Quantitative criteria are used as well as the qualitative assessments from UBS’s knowledgeable experts. The goal is to find high-quality companies with sustainable dividend payments that ultimately offer good prospects for a high total return. One of the key characteristics of these first-class companies is a strong foundation: healthy balance sheets, positive cash flows and sustainable growth are crucial features.

Optimized selection process

The quantitative selection process is based on three factors: expected dividend growth, the probability of a dividend cut and the forecast of relative return. Using a machine learning algorithm, known as “random forests” in technical jargon, the equities are ranked according to the defined criteria. Qualitative assessments, i.e. the analyst ratings from UBS Research, play an equally important role in the selection process. In addition, the dividend yield and liquidity of each of the companies are scrutinized closely.

Quality has priority

A glance in the rear-view mirror shows that the UBS US Quality Dividend Payers Index has what it takes to outperform the overall market over the long term. Between 2014 and 2019, the strategy barometer outperformed the S&P 500 in 61 percent of quarters, especially in periods of falling share prices. In the backtesting phase, for example, there were 16 quarters in which the S&P 500 booked losses. In 14 of these 16 periods, the UBS US Quality Dividend Payers Index outperformed the benchmark. The overall result is also impressive: the annualized return over the period under review is 11.5 percent for the innovative strategy index, compared to only 8.9 percent for the S&P 500.1)

Product solution

With a global dividend strategy, personal asset allocation can be optimized over the medium to long term. The UBS US Quality Dividend Payers Index provides easy access to dividend hits from overseas markets. The underlying asset is always kept fresh: each quarter, the UBS US Quality Dividend Payers Index is subject to review and is adjusted if necessary. Investors may purchase the high-quality equity selection through UBS Open End PERLES with just a single transaction.

1) Past performance does not indicate future results.


 

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