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28-APRIL-2022

BME launches 4 new indices that eliminate dividend risk

  • The new IBEX family indices replicates the performance of the IBEX 35® total return and discounts the dividends by a constant (decrement) on an annual basis.
  • This type of indices is often used as underlying for various structured products.

The IBEX family is growing. BME has just launched the IBEX 35® TR Decrement 400 P, IBEX 35® TR Decrement 450 P, IBEX 35® TR Decrement 4.5% and IBEX 35® TR Decrement 5.0% indices. They all replicate the daily performance of the IBEX 35® total return but are discounted by a constant (known as decrement) on an annual basis, and therefore in terms of performance these indices should be compared with the IBEX 35® index.

The various versions of these indices discount this constant either in fixed annual dividend points, with levels of 400 and 450 points, or in a fixed annual percentage of 4.5% and 5%. In all cases, this annual yield decrease is applied on a daily basis.

This type of indices, which often serve as underlying for various structured products, seek to eliminate dividend risk, i.e. the uncertainty about the future dividend payments of listed companies. In this way, issuers of structured products can offer more favourable terms, such as greater capital protection.

These four new indices bring to 72 the total number of indicators in the IBEX family.

This new index series is the second to be launched following the SIX methodology after the IBEX Gender Equality Index and is aligned with SIX’s Decrement Indices, which were also recently launched.

Carmen López, Head of Indices at BME, explains that "our goal is to meet the needs of our clients and we are always willing to launch new indices that offer investors new alternatives".