The Global Quality Income Risk Control 10%, "Index" aims to provide an exposure to the SG Global Quality Income, "Sub-Index" with a volatility target mechanism. The aim of the "sub-index" is to create a robust compounding machine through the creation of a portfolio of companies selected solely on the basis of their ability to provide a high quality income stream to their owners.The requirement that selected businesses enjoy high quality economics ensures dividends are unlikely to be cut. The nature of dividend flows as a share of revenues suggests they will tend to rise, thus affording yield hungry investors a degree of inflation protection.
The Quality Income indices range aims at selecting stocks with the best potential for long-term performance by focusing on companies generating high levels of revenues over the long term. The investment universe is global, to profit from diversification on several geographical zones.
Three consecutive filters are applied:
- A Quality filter: every company is ranked according to a Quality score (ranging from 1 to 9) including elements on profitability, level of financial leverage, operational efficiency, etc. Only companies with scores above 7 are selected.
- Distance to Default filter: only companies ranking in the top 40% of the universe are selected.
- Dividend filter: only stocks paying a dividend yield at or above 3.5% are kept in the selection.