Index provider MSCI has launched two new indices that track segments of the Australian market.
The MSCI Australia Select High Dividend Yield Index consists of 38 Australian securities with higher-than-average dividend yields and the potential for franked dividend income.
Only securities with a track record of consistent dividend payments and that have the capacity to sustain future dividend payments are eligible for inclusion in the index, the company said.
"That is the thing to be wary of when you chase a high dividend yield security - has it just got a high yield because the price [of the security] has gone down?" MSCI Australia executive director Michael Anderson said.
"The way we build our index in Australia, we can only find 38 securities that meet our screens," he said.
Although high-yield security investments have received renewed interest as income-generating products in the pension phase, Anderson said the index was not constructed with this development in mind.
"High dividend yields have been a hot topic," Anderson said. "But that is not why we built this product. We built this product based on interactions with the Australian market place and what we see is a demand for an index like this."
Anderson said the company had spoken with exchange-traded fund (ETF) providers in Australia, whose products track indices, but would not identify any of the parties due to confidentiality agreements.
However, it is understood that State Street Global Advisors will unveil a new high-yield ETF later this week.
Currently, more than $275 billion in ETF assets are tracking MSCI indices worldwide.
The MSCI Australia 200 Index tracks the performance of the largest 200 companies on the domestic Australian equity market.
The index composition is based on minimum size, liquidity and float requirements.
The main difference with the S&P/ASX 200 index is that it excludes foreign companies listed on the Australian Stock Exchange, such as Singapore Telecommunications, New Zealand Oil and Gas, and News Corp.
"The real reason for launching these indices is to provide choice," MSCI Barra executive director Mark Valadao said.
