SYDNEY, October 4, 2011 - The 2011 reporting season has rewarded investors with dividends as companies unload excess cash from their balance sheets in the face of a lower growth environment according to new data released by Russell Investments.
This season the market has delivered a 9% increase in dividends to investors compared to the previous reporting season. The growth has been captured by Russell’s high dividend and high value indexes as per data from the semi-annual reconstitution of these indexes, released today.
The Russell Australia High Dividend Index, which forms the basis of the Russell High Dividend Australian Shares ETF (RDV), has benefitted from the dividend growth by capturing companies with an emphasis on forward looking dividends and those with more stable earnings profiles. A table of the new top holdings in both indexes is included in the notes to editors.
“In this period of lower growth forecasts and heightened volatility, companies are taking the prudent approach and returning capital to shareholders instead of reinvesting cash. This has resulted in Australian companies delivering actual income for investors,” said Scott Bennett, Russell Portfolio Manager.
For investors in RDV this has provided an additional 2% (including franking credits) in income than the market, well above current term deposit rates.
Some of the surprising income performers identified in the semi-annual reconstitution of the Russell Australia High Dividend Index are:
A full list of the top 10 stocks in the index is included in the note to editors below.
Value to be found in resources as financials lose “cheap” appeal
Regarding the Russell Australia High Value Index, Mr Bennett said the index has been selling down its exposure to banks which have recently outperformed the market and instead buying into resources which have recently underperformed.
“In stock movements this translates into buys of BHP and Rio and selling down the banks, in-line with our strategy of providing investors with an easy access point to a disciplined buy low, sell high, investment strategy,” he said.
The index, designed to systematically buy companies trading “cheaper” and sell those whose prices look “expensive” relative to the broader market, had recently changed its position from earlier in the year as the value opportunities shifted.
“Contrary to the direction taken by many investors earlier in the year, Russell’s High Value Index saw value in financials at a time when market watchers were shying away, and went underweight resources while they were experiencing a rally,” Mr Bennett said.
The strategy has paid off with the index outperforming the broader market since its launch in April 2011.
Russell ETFs outperform
The strong performance of Russell’s proprietary indexes has also helped its custom built ETFs - the Russell High Dividend Australian Shares ETF (RDV) and Australian Value ETF (RVL) - to outperform the broader market. RDV has delivered investors a 7% yield (annualised) before franking credits, close to 2% more than the broader market. And RVL, launched in April, has outperformed the broader market by 0.8% by identifying relatively cheap and undervalued stocks.
“The performance of Russell’s ETFs shows us even during trying market conditions, there are other opportunities for investors than traditional capitalisation weighted indexes,” Mr Bennett concluded.
Russell Austraila High Value Index (RAHVI)
Top 10 holdings |
Weight |
BHP Billiton Ltd |
25.47% |
Westpac Banking Corp |
13.68% |
Commonwealth Bank of Australia |
13.35% |
Australia New Zealand Banking Group Ltd |
11.36% |
Telstra Corp Ltd |
8.68% |
Rio Tinto Ltd |
5.10% |
Foster's Group Ltd |
2.32% |
National Australia Bank Ltd |
1.62% |
Westfield Retail Trust |
1.60% |
Stockland |
1.54% |
Russell Austraila High Dividend Index (RAHDI)
Top 10 holdings |
Weight |
Commonwealth Bank of Australia |
7.11% |
BHP Billiton Ltd |
7.06% |
Telstra Corp Ltd |
6.06% |
Australia New Zealand Banking Group Ltd |
5.51% |
Westpac Banking Corp |
6.55% |
National Australia Bank Ltd |
5.33% |
Westfarmers Ltd |
3.91% |
Tatts Group Ltd |
2.89% |
Woolworths Ltd |
3.29% |
SP AusNet |
2.65% |
As at 1 October, 2011
Issued by Russell Investment Management Ltd ABN 53 068 338 974, AFS License 247185 (RIM). This communication provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. Any potential investor should consider the latest Product Disclosure Statement (PDS) for the Russell High Dividend Australian Shares ETF (RDV) and/or Russell Australian Value ETF (RVL) in deciding whether to acquire, or to continue to hold, units in RDV or RVL. Only persons who have been authorised as trading participants under the Australian Securities Exchange (ASX) Market Rules can apply for units in RDV or RVL through the latest PDSs. Investors who are not Authorised Participants looking to acquire units in RDV or RVL cannot invest through the PDS but may purchase units on the ASX. Please consult your stockbroker or financial adviser.
The Russell High Dividend Australian Shares ETF tracks an index that is weighted towards companies that are expected to deliver dividends higher than the market average, however high dividends cannot be guaranteed.
The Russell Indexes are trademarks of Frank Russell Company (FRC) and have been licensed for use by RIM. Neither RDV nor RVL is sponsored, issued, sold or promoted by FRC and FRC makes no representation or warranty regarding the advisability of investing in RDV or in any of the securities upon which the Russell Index is based. FRC has no obligation or liability in connection with the administration, marketing or trading of either RDV or RVL. FRC is not responsible for and has not reviewed RDV or RVL, nor any associated literature or publications and makes no representation or warranty express or implied as to their accuracy or completeness. FRC does not guarantee the accuracy and/or the completeness of the Russell Indexes or any data included therein and FRC shall have no liability for any errors, omissions or interruptions therein.
Copyright 2011 Russell Investments. All rights reserved.
MKT/4149/0911
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information about a press release
please contact:
SUSIE LAMBERT
Honner Media
susie@honnermedia.com.au
02 8248 3747
CRAIG MORRIS
Marketing Director, Australasia
Russell Investments
cmorris@russell.com
02 9229 5120
