Financial data vendor Thomson Reuters has launched a new smart beta index tracking the most sustainable earning and high dividend-yielding companies in Asia Pacific excluding Japan. The Thomson Reuters StarMine Quality Earners APAC ex-Japan Income Index harnesses the StarMine proprietary earnings quality model to identify those companies with the most reliable and persistent earnings over time, thereby seeking higher income generation and lower volatility compared with a traditional Asia Pacific index. The index has been made licensable for the creation of future exchange-traded funds.

Stephan Flagel, Head of Indices for Thomson Reuters.

The StarMine Earnings Quality model identifies companies with strong cash flows, high operating efficiency and strong track record of reported earnings meeting earlier projections. By screening stocks through this methodology, the index aims to select high dividend stocks with sustainable payout policies.

The index uses a factor based on a company’s dividend yield and StarMine Earnings Quality Score to determine top earners. The final 50 candidates are given an equal weighting in the index, and currently have an average market cap of $7.7bn. According to Thomson Reuters, this has resulted in approximately 30% higher returns and 30% lower volatility than a broad market capitalization weighted index for the same region, over the last ten years.

“Investors in Hong Kong and the rest of Asia Pacific are telling us they are looking for income stocks,” said Stephan Flagel, Head of Indices for Thomson Reuters. “At Thomson Reuters, we have access to an unrivalled set of cross-asset prices, analytical and evaluated data to use for proprietary and custom indices. Using our StarMine Earnings Quality model, not only can we identify the top earners at each point in time, but we can also tell which of these companies are the most reliable and likely to persist in being profitable.”