Dow Jones ETFs in focus as index celebrates 120th anniversary

May 31st, 2016 | By | Category: Equities

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Global index provider S&P Dow Jones Indices has celebrated the 120th anniversary of the Dow Jones Industrial Average (DJIA), a widely followed gauge for US stock market performance. The DJIA is a price-weighted average of 30 stocks traded on the New York Stock Exchange and the NASDAQ and is the reference index for several exchange-traded funds.

US equity ETFs in focus as Dow Jones celebrates 120th anniversary of launch

To mark the occassion, executives of S&P Global and its division, S&P Dow Jones Indices, along with several CFOs of the DJIA companies, rang The Closing Bell at the New York Stock Exchange on Thursday 26 May 2016.

The DJIA was devised in 1896 by Charles Dow, a US journalist also known for starting the Wall Street Journal. Often referred to as “the Dow,” the DJIA is one of the oldest, single most-watched indices in the world and includes companies such as General Electric Company, the Walt Disney Company, Exxon Mobil Corporation and Microsoft Corporation.

The index was designed to reflect the health of the broad US economy. The original constituents were virtually all industrial in nature, reflecting the make-up of the US economy at the time. As the US economy has evolved, so has the constituents within the index. Today the index comprises several financial companies, such as JP Morgan Chase and Goldman Sachs, as well as technology giants such as Intel and Apple. Coca-Cola, Johnson & Johnson, McDonalds, Pfizer and Walt Disney are also current constituents.

Only one of the original 12 constituents – General Electric Co. – has managed to remain in the index throughout its history, indicating the dramatic change that the US economy has experienced over the past 120 years.

Douglas L. Peterson, President and Chief Executive Officer of S&P Global, said in a statement: “The Dow is one of the great innovations in the history of business and commerce… The Dow embodies transparency, analytical rigor and integrity and it is those qualities that have been instrumental in its long-term position as the pre-eminent benchmark of US blue-chip companies.”

Alexander J. Matturri, Chief Executive Officer of S&P Dow Jones Indices, added: “For 120 years, the Dow Jones Industrial Average has remained the essential gauge for the economic health of the US market and continues to demonstrate tremendous vitality.

“The unrivaled reputation, integrity and track record of this benchmark fully reflect the fundamental role that indices play in today’s financial market. We proudly trace the root of S&P Dow Jones Indices’ success to this very first headline benchmark and the pioneering spirit that our predecessors put forward 120 years ago.”

Turning to the current fundamental indicators of the index, its dividend yield as of 26 May 2016 is 2.62% and its price-to-earnings ratio is 19.0x. There are significant allocations to the industrials (19.2%), information technology (17.1%), consumer discretionary (15.9%), financials (15.5%) and healthcare (13.0%) sectors, while the largest constituents are 3M (6.5%), Goldman Sachs (6.1%), IBM (5.9%), Home Depot (5.1%) and United Health Group (5.1%).

The SPDR Dow Jones Industrial Average ETF (DIA) holds over $11.6bn in assets under management (AUM) as of 26 May 2016. The total expense ratio (TER) is 0.17%.

The iShares Dow Jones US ETF (IYY) holds over $928m in AUM as of 27 May 2016. TER – 0.20%.

The ProShares Ultra Dow30 ETF (DDM) provides twice the daily performance of the DJIA. TER – 0.95%

Executives of S&P Global and its division, S&P Dow Jones Indices, along with several CFOs of the DJIA companies, rang The Closing Bell at the New York Stock Exchange.

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