• What Happened in Spain? In looking at figures 2a and 2b, the case of Spain literally leaps off the page, so we looked a bit more deeply into what was driving the 40% Dividend Stream growth figure. It’s worth noting here that Spain’s total Dividend Stream, slightly over $32 billion, is less than 10% of Europe’s total Dividend Stream, which we saw earlier is $388.3 billion. Broadly speaking, there are two drivers of Spain’s dividend growth:4
o Companies Re-initiating Payments: Telefonica SA5 and Endesa SA6 are two examples of this phenomenon. Both failed to make their dividend payments leading up to the 2013 screening date, so they were not eligible to contribute to Spain’s Dividend Stream. In 2014, Endesa SA had a Dividend Stream of over $2 billion, and Telefonica re-initiated an annual Dividend Stream to contribute more than $4.6 billion.
o Companies Growing Dividends Significantly: Repsol SA7 is an example of a firm that was included in Europe’s Dividend Stream in 2013, but that nearly doubled its dividend per share for this year’s screening date. Its contribution was over $1.7 billion.
This is the first of a series of blogs that will discuss our European Index rebalance. In future installments, we’ll dig into some specific Indexes and describe how the rebalancing process illustrates a real-time case study of smart beta at work.
For the full research on the WisdomTree European Indexes rebalance, click here.
1Refers to annual screening dates 5/31/13 and 5/31/14.
2Refers to the universe of the WisdomTree Dividend Index, with most recent Index screening date of 11/30/13.
3Royal Bank of Scotland is not a dividend-paying company and is therefore not included in any WisdomTree Dividend Index.
4For entire paragraph and subsequent two bullets, sources are WisdomTree, Standard & Poor’s and Bloomberg, with data as of 5/31/14 Index screening.
5As of the 5/31/14 Index screening date, Telefonica SA was prescribed to be a 1.09% weight in the WisdomTree International LargeCap Dividend Index, a 0.81% weight in the WisdomTree DEFA Index, a 1.30% weight in the WisdomTree DEFA Equity Income Index, a 1.64% weight in the WisdomTree International Dividend ex-Financials Index and a 5.77% weight in the WisdomTree Europe Hedged Equity Index
6As of the 5/31/14 Index screening date, Endesa SA was prescribed to be a 0.51% weight in the WisdomTree International LargeCap Dividend Index, a 0.37% weight in the WisdomTree DEFA Index, a 0.61% weight in the WisdomTree DEFA Equity Income Index and a 1.44% weight in the WisdomTree International Dividend ex-Financials Index.
7As of the 5/31/14 Index screening date, Repsol SA was prescribed to be a 0.41% weight in the WisdomTree International LargeCap Dividend Index, a 0.30% weight in the WisdomTree DEFA Index, a 0.48% weight in the WisdomTree DEFA Equity Income Index and a 1.24% weight in the WisdomTree International Dividend ex-Financials Index.
Important Risks Related to this Article
Investments focused in Europe are increasing the impact of events and developments associated with the region, which can adversely affect performance. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Dividends are not guaranteed and a company’s future abilities to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time. Performance, especially for very short time periods, should not be the sole factor in making your investment decision.