With many countries raising interest rates to fight against inflation, the Russia-Ukraine conflict adding uncertainties to the energy supply, and repeat infection waves undermining economic activity, the world market has been struggling to recover from the COVID-19 crisis since 2020. In turbulent times, a focus on quality stocks with high dividend yields may present a compelling investment solution for market participants seeking stable income.
The S&P 500 Quality High Dividend Index seeks to provide just such a solution—it selects stocks that rank within the top 200 of the S&P 500 by quality score and dividend yield (see Exhibit 1). This order-indifferent approach ensures extensive and balanced exposure to both quality and dividend yield. Constituents are equally weighted and rebalanced semiannually.
What Is Quality?
S&P Dow Jones Indices defines quality as a combination of profit generation, earnings quality and financial robustness (see Exhibit 2). Together, these traits generally shield companies from the volatility of the economic cycle, making them slightly more immune to downturns.
