Solactive, the innovative German index engineer, announces the launch of the Solactive Stable Income Europe Index.
This index is replicating the performance of 50 European shares selected on the basis of a screening strategy blending together free cash flow yield, dividend yield and low volatility characteristics.
The index targets investors interested in a smart beta concept that puts more
emphasis on the role played by free cash flow yield, aside from tilting composition
towards high dividend and low volatility shares. Specifically, free cash flows are
typically used to provide an insight into a company’s financial health. Being closely
related to earnings, they can give investors an indication of future shareholder
dividends, the company’s reinvestments plans and its ability to fulfil financial
obligations.
As such, the Solactive Stable Income Europe Index applies at first a free cash flow yield
filter which selects the top performing shares in each sector. Companies are then
assigned a composite score which combines low volatility and high dividend yield
criteria. Only the top 50 companies with the highest score are then chosen as index
components. The index is licensed to Societe Generale Corporate & Investment
Banking and will be used as an underlying asset for structured solutions, leveraging on
the bank’s solid expertise in this area.
Steffen Scheuble, CEO of Solactive, commented: “Nowadays many indices and financial
products are constructed around high dividend yield and low volatility concepts. The
Solactive Stable Income Europe adds another element into the mix by screening shares
also on free cash flow yield, therefore providing an additional filter to evaluate
companies’ resilience.”
Daniel Fermon, Head of Thematic Research at Societe Generale Corporate &
Investment Banking, added: “In a constantly changing economic environment, investing
in companies which offer high free cash flow visibility and robustness is a compelling
strategy. Societe Generale is pleased to partner with Solactive on the launch of this new
index as we expect this long-term investment thematic to remain key for investors.”
The Solactive Stable Income Europe Index is calculated as a price return index
denominated in EUR. Constituents must have a free float market capitalization of at
least EUR 200 million and a 120-day ADV of at least EUR 1 million. The three most
represented sectors in the index are Finance, Industrials and Technology with a
composite weight of 76% as of the last rebalancing day. The three countries with the
highest weight are France, Germany and Switzerland reaching 66% of the index total.
The index is weighted equally and rebalanced quarterly.
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