Indexology^® Blog

S&P Dow Jones Indices is pleased to introduce the new S&P 500^® Dividend Drivers Index, which offers a holistic approach to identifying dividend-paying companies within the S&P 500. Unlike traditional approaches that emphasize a single metric—such as high yield or dividend growth—the index focuses on the key drivers of dividend strength. It combines historical and forward-looking dividend growth, current dividend yield, and profitability to deliver a three-dimensional assessment that encompasses past, present and future potential.

In this first blog post, we’ll explore its methodology and compare its performance, dividend characteristics and profitability profile with those of its underlying universe, the S&P 500.

Methodology

To be eligible, companies must have increased their dividends for at least 10 consecutive years. They must also have an expected dividend increase for the upcoming year, based on S&P Global Market Intelligence’s Dividend Forecasting dataset.

Eligible companies are then selected using a composite score that combines three fundamental measures: five-year dividend growth, 12-month forecasted dividend yield and return on invested capital (ROIC). Final index weights are then determined based on each constituent’s 12-month forecasted dividend yield.

Performance Overview

Based on the back-tested period from April 30, 2010, to July 31, 2026, the S&P 500 Dividend Drivers Index outpaced the S&P 500 by approximately 41 bps on an annualized basis. This result is notable given that dividend-oriented stocks generally lagged during the long bull market over this period, which was largely driven by lower-yielding growth and technology companies. While the S&P 500 Dividend Drivers Index exhibited slightly higher volatility than the S&P 500, its defensive characteristics were reflected in its lower capture ratios, particularly its 88.15 downside capture ratio over the period.

Dividend Characteristics

Across the full back-tested period, the S&P 500 Dividend Drivers Index had an average dividend yield of 3.06%, significantly higher than the S&P 500’s 1.76%. With the S&P 500’s current yield at 1.10% and well below its historical average, the S&P 500 Dividend Drivers Index’s current yield of 2.99% stands out in today’s low-yield equity market environment.

The back-tested results also indicated stronger dividend growth. Over the same period, the S&P 500 Dividend Drivers Index posted an annualized dividend growth rate of 10.7%, outpacing both the S&P 500 (8.5%) and the CPI inflation rate (2.6%). The gap between dividend growth and CPI inflation—about 8 percentage points—corresponded to a 3.2-fold increase in purchasing power since April 2011, after accounting for inflation.

Profitability Comparison

A distinctive feature of the S&P 500 Dividend Drivers Index as a dividend strategy is its emphasis on profitability. Exhibit 5 shows that, as of June 30, 2026, the S&P 500 Dividend Driver Index’s ROIC was broadly in line with that of the S&P 500, while its return on equity (ROE) of 26.0% was significantly higher. High profitability is a defining characteristic of the index, as it has historically been associated with earnings growth, a key factor in supporting long-term dividend growth potential.

Conclusion

The S&P 500 Dividend Drivers Index provides a more comprehensive view of dividend drivers across multiple characteristics and time horizons. The index modestly outperformed the S&P 500 over the back-tested period and exhibited significantly higher dividend yield, dividend growth and profitability. Overall, these results suggest that incorporating multiple drivers in the selection process led to both differentiated performance outcomes and distinct index characteristics relative to the benchmark.

How does an index framework built with diverse constituents from 48 global markets help address concentration concerns in an efficient, simplified way? 

Whether you call it soccer or football, there’s no denying the World Cup was a blast for North Americans and visitors alike. Off the field, one of the most enjoyable spectator sports was watching camaraderie emerge from road trips and cultural mashups. Whether it was the Tartan Army firing up the Miami Marlins, Samurai Blue fans discovering Buc-ee’s brisket, or Lawrence, Kansas embracing all-things Algeria, unexpected combinations often bring the greatest results.

From a U.S. equities perspective, the first seven months of 2026 combined to produce sound results, but with strong headline index performance masking underlying macroeconomic uncertainty and broadening market leadership. A defining indicator of this current regime is the Cboe S&P 500^® Dispersion Index (DSPX). As of July 21, 2026, the DSPX reached 47.5, its highest level since March 2020, as shown in Exhibit 1. Elevated dispersion indicates significant variance in constituent performance, potentially creating a more favorable environment for factor-based strategies.

Among the multiple factors that have benefitted from a high-dispersion environment, the S&P 500 Momentum Index stands out, rising 20.2% YTD (see Exhibit 2).

While the S&P 500 Momentum Index’s outperformance so far in 2026 has owed much to its current selection of semiconductors stocks, further down in Exhibit 2 sits a less discussed factor that has fared relatively well YTD despite completely eschewing the Semiconductor & Semiconductor Equipment industry group—the S&P 500 Low Volatility Index.

As the AI narrative cooled in July and the S&P 500 Momentum Index pulled back, the S&P 500 Low Volatility Index generated outperformance, a short-term result that points to a longer-term pattern of low, and even negative, correlation with the S&P 500 Momentum Index. As of July 2026, the one-year rolling correlation coefficient between the excess performance of the S&P 500 Low Volatility Index and the S&P 500 Momentum Index stood strongly negative, at -0.52 (see Exhibit 3).

In Exhibit 4, we take a closer look at these two factors through the lens of trailing one-year performance, underscoring how the S&P 500 Low Volatility Index and S&P 500 Momentum Index have behaved quite differently depending on the market regime.

We’ve previously discussed the S&P 500 Momentum Index’s historical pattern of outperformance in up-cycles and the S&P 500 Low Volatility Index’s resilience in market downturns. Indeed, both factors have historically reflected slightly more upside than downside, yet remained uncorrelated, suggesting a possibility for performance improvement and diversification through combination.

To investigate this thesis, we created a hypothetical index blend consisting of a 50% weight in the S&P 500 Low Volatility Index and a 50% weight in the S&P 500 Momentum Index, then measured its performance relative to the S&P 500 over a 30-year time horizon as well as the YTD 2026 period.

Exhibit 5 illustrates the 2026 YTD performance of the unrebalanced hypothetical blend, which outperformed the S&P 500 benchmark by 4.5% and outperformed for most of the period.

Perhaps owing to the S&P 500 Low Volatility Index’s track record of asymmetric upside/downside capture (i.e., reflecting less downside than upside) combined with the S&P 500 Momentum Index’s demonstrated tendency to outperform in rising markets, the hypothetical blend exhibited a mix of the two factors’ traits, on average reflecting 87.8% of upside during the 12-month periods in which the S&P 500 rose and 61.0% of downside when the benchmark fell over the 30-year back-tested period. It should be no surprise that compounding this hypothetical differential through the ups and downs generated cumulative performance exceeding that of The 500^® while also producing less volatility, as illustrated in Exhibit 6.

Individually, factor indices each tell interesting stories about behavioral and economic forces driving global markets. Like travelers of the world, they each come with their own unique histories full of ups and downs. They each evolve and reflect underlying trends, and their differences point toward the intriguing possibilities of new and diverse combinations waiting to be explored.

The author thanks Luke Twum-barima for his research contributions to this blog.

In November 2025, S&P DJI expanded its S&P Dividend Growers Index Series by launching the S&P Developed Ex-North America Dividend Growers Index. Like its counterparts, the index focuses on companies with a consistent history of dividend payments, while excluding those with the highest yields to help reduce the risk of yield traps.¹ Over the back-tested period, this disciplined approach generated robust long-term outperformance and strong defensive characteristics relative to its universe, the S&P EPAC BMI.

In this blog, we will provide an overview of the index’s methodology—including its rigorous criteria—and showcase its outperformance and key defensive characteristics.

Methodology

To qualify for inclusion, companies must have raised their dividends for at least seven consecutive years. Next, those ranked in the top 25% by indicated annual dividend (IAD) yield are excluded to help mitigate the risk of yield traps. Companies passing these screens are selected for the index and weighted by float-adjusted market capitalization (FMC).

The dividend growth and yield screens are the defining features of the S&P Dividend Growers Index Series. By working in tandem, these filters aim to enhance the overall quality of the index and drove its strong performance and defensive characteristics over the back-tested period, which will be explored in the following sections.

Performance

Over the 20 years of back-tested data since its inception, the S&P Developed Ex-North America Dividend Growers Index outpaced the S&P EPAC BMI by approximately 92 bps on an annualized basis. Notably, it delivered this outperformance while demonstrating defensive characteristics, including lower volatility (11.93% versus 12.95%), a smaller maximum drawdown (39.0% versus 46.6%) and more favorable capture ratios (90.77 upside and 79.76 downside) relative to the S&P EPAC BMI.

Beyond these standard measures of defensive characteristics, the next section delves deeper into how the index behaved during past drawdown events and across different macroeconomic environments.

Defensive Characteristics

Over the back-tested period, the S&P Developed Ex-North America Dividend Growers Index outperformed the S&P EPAC BMI in five of the last seven major drawdown periods. During these drawdowns, it demonstrated downside protection, with an average decline of 12.0% compared with 16.1% for the S&P EPAC BMI.

Defensive characteristics are further highlighted in Exhibit 4, which shows the index’s outperformance or underperformance across four macroeconomic environments defined by rising or falling inflation and growth. The index’s defensive profile is underscored by its outperformance in three of the four regimes, with its strongest results in the “risk-off” stagflationary environment (falling growth, rising inflation), while it lagged only in the “risk-on” regime characterized by rising growth and falling inflation.

Consistent Outperformance

A key highlight from the back-tested period is the consistent outperformance of the S&P Developed Ex-North America Dividend Growers Index, which becomes more pronounced over longer investment horizons. The index outperformed the S&P EPAC BMI in 58% of one-year rolling periods, 70% of three-year rolling periods and a notable 82% of five-year rolling periods.

Conclusion

S&P DJI is pleased to expand the S&P Dividend Growers Index Series with the S&P Developed Ex-North America Dividend Growers Index. Like others in the broader series, the index’s rigorous methodology has led to strong long-term performance and defensive characteristics throughout the back-tested period.

¹For more information about yield traps, please see: https://www.vanguard.com.au/personal/learn/smart-investing/investing-strategy/avoid-dividend-yield-traps

Income-oriented indexing has entered a new phase. What began with relatively straightforward option-writing indices has evolved into a broader toolkit of rules-based strategies designed to reflect more targeted outcomes. This evolution reflects a shift in investor demand beyond pure beta exposure and toward outcome-oriented solutions. In recent years, systematic derivative income strategies have grown meaningfully across both ETFs and structured products.

With the launch of the first autocallable ETF in 2025, sophisticated payoff structures that were once only accessible to a limited set of market participants via structured products are now available to the broader market. Indexing has helped make this innovation possible. Today, a single rules-based index can theoretically replicate the payoff structure of an autocallable—also referred to as an autocall—by combining multiple forms of optionality into a rules-based methodology incorporating features such as hypothetical contingent income, observation dates, barriers and potential early redemption. Recall that an index is not an investment product; one cannot invest directly in an index but rather an investment product based on an index.

S&P Dow Jones Indices recently launched two autocall indices: the S&P 500 Futures 40% Defined Volatility Autocall Index and the S&P U.S. Equity Momentum 40% VT Autocall Index. Each index takes a different approach to replicating an autocall payoff structure reflecting potential income generation. For more information, please see the S&P 500 Futures 40% Defined Volatility Autocall Index Methodology and the S&P U.S. Equity Momentum 40% VT 4% Decrement Autocall Index Methodology.

To better understand these indices, it’s necessary to understand how autocalls work. Autocall notes link coupon payments to the performance of a reference asset—in this case an underlying index. If the reference index remains above a predetermined level, the autocall pays a coupon. If the reference index experiences a  certain decline, coupon payments may cease or principal may be at risk. In this way, autocall structures reflect tradeoffs; market participants may enjoy income derived from equity markets in exchange for some downside risk.

The S&P 500 Futures 40% Defined Volatility Autocall Index features a “dual yield” structure, with the potential for simulated income generation both from coupons and 50% of the upside participation of the reference index’s performance. This additional upside participation aims to mitigate the opportunity cost that an autocall structure may face during equity market rallies.

The S&P U.S. Equity Momentum 40% VT Autocall Index features a memory coupon that lasts for 12 months. For an eligible coupon as of a point in time, the memory coupon will also reflect any missed coupons from the past 12 months. The index also features a “pruning” mechanism that serves to systematically replace underperforming autocalls.

Both autocall indices employ a laddered structure whereby new autocalls are initiated on a staggered basis to help mitigate the impact of entry point risk and tail risk.

As investor demand for defined outcome strategies continues to evolve, indices may play an increasingly important role as a tool in making sophisticated payoff structures accessible via linked investment products to a broader set of market participants.