Satrix DIVI

By: Satrix  11-11-2011

Background
Satrix listed a great new addition to its family of Satrix products in late-August 2007. The Satrix Dividend provides a means of investing in a portfolio of companies paying higher than average dividends on the JSE.

The Satrix DIVI portfolio invests in the FTSE/JSE Dividend Plus Index. This consists of 30 companies, selected from the JSE Top 40 and Mid-Cap indices, that are expected to pay the best normal dividends over the forthcoming year. The unique features the Satrix DIVIoffers are:


  • It appeals to investors seeking a high income portfolio on the JSE.
  • It holds the promise of outperformance, as the high dividend paying component companies in the Satrix DIVI are likely to re-rate relative to the rest of the market.
  • The Satrix DIVI has a lower correlation with other indices on the JSE and accordingly, it provides an ideal product for diversifying investment portfolios.


The high yield nature of the Satrix Divi provides a defensive investment for the risk averse investor.

About Satrix Dividend Plus (Satrix DIVI)

The Satrix DIVI tracks the FTSE/JSE Dividend Plus Index, similar to the way other Satrix products, track main FTSE/JSE indices. The Satrix DIVI portfolio consists of the 30 shares on the Dividend Plus Index, held in exactly the same weighting they constitute in the index calculations made by FTSE/JSE. In this way, the Satrix DIVI replicates the performance of this index.

All dividends received from the constituent companies in the Dividend Plus index, are distributed by Satrix to investors at the end of each quarter. In this way, Satrix provides the capital return of the index, as well as the dividend yield, associated with this index.

Similar to other products in the Satrix family, the Satrix DIVI is a listed security (Exchange Traded Fund) and its JSE code is STXDIV. In addition, Satrix DIVI is registered as a Collective Investment Scheme with the Financial Services Board (FSB). The Satrix products are therefore registered and fall under the legislative control and regulation of both the JSE and the FSB, providing peace of mind for investors.

The Satrix DIVI , similar to other Satrix ETFs, is an open-ended fund provides physical delivery of baskets of index component stocks to investors, who wish to subscribe for or redeem large amounts in the product. Such physical swap transactions take place at the daily Net Asset Value (NAV) value of the Dividend Plus portfolio. The NAV includes the value of the index and any dividends or other income (net of costs) in the Satrix Dividend portfolio. As Satrix exactly replicates the constituent components of the index, this physical swap characteristic of all listed ETFs, ensures very accurate tracking of the index.

Details on the FTSE/JSE Dividend Plus Index

FTSE/JSE launched the Dividend Plus Index in August 2006. The Dividend Plus is a yield weighted index designed to select and measure the performance of the higher yielding shares on the JSE.

The index selects the top 30 high yield instruments based on a one year forecast dividend yield. The consensus forecast of stockmarket analysts, from both the buy and sell side of the industry, is collected in the McGregor BFA Survey. The analysts provide forecasts purely based on cash dividends, therefore excluding special dividends, capital reductions and capital repayments.

The index universe consists of companies in the FTSE JSE Top 40 and FTSE/JSE Mid-Cap indices, excluding property companies.

The selection of the 30 shares in this portfolio is based on forecasted dividend yield rather than market capitalisation and price, which is the method normally used in index construction.

The index is reviewed at least twice annually in June and December. Any additions and deletion to the index will only be done at the twice yearly review, except in the case where corporate actions occur, such as terminations or mergers. In which case, the FTSE/JSE maintains a reserve list of the five highest ranking shares, sorted by forecasted dividends, and the next highest ranking share replaces one which falls out of the index.

In order to reduce index constituent changes, a maximum of 5 additions and 5 deletions are allowed at each review. The JSE code is J259.

Dividend Indexation

Dividend based products have become particularly popular in international markets. Reasons for this include:


  • Dividends and their growth provide a strong theoretical basis for the value of individual stocks and portfolios of stocks.
  • Dividends have historically provided the major part of the US stockmarkets real return. For instance, a study by Professor Jeremy Siegel, of the Wharton School found that from 1926 to 2004, reinvestment of dividends accounted for 96% of the stockmarkets return after inflation.
  • Dividends tend to offer more protection in bear markets, particularly if investors buy more shares with reinvested dividends.

Cash dividends are an objective measure of a company's value and profitability and is subject to limited manipulation by accounting methods.

Satrix DIVI - Performance

The Satrix DIVI, which is a passive index tracking portfolio, based on the highest sustainable dividend yielding products on the JSE Top 40 and Mid-Cap share universe, looks an exciting product for adding both income as well as capital returns to the investment options available to stockmarket and unit trust investors.

The Satrix DIVI looks to provide an excellent means of seeking alternative alpha (or performance); to diversify portfolios; to seek higher yields; and to provide a new asset class.

 
1 year return16.26%17.55%
3 year return22.31%23.18%
**Fund established February 2002. Returns calculated for lump sum investments. All dividends reinvested.


Low Cost 

Satrix Divi does not charge substantial management fees or other advisory and ongoing costs, common to other managed investments. The income Satrix earns from scrip lending activities further reduces the cost to the investor.

There are two levels of costs that will be incurred by the investor. The first being portfolio expenses and the second being fees that you will incur depending on the investors preferred channel of investment.

Portfolio expenses
Portfolio expenses include fees incurred to run the Satrix Divi portfolio such as management fees paid to Satrix Managers, custodian fees, brokerage, auditor’s fees, bank charges and taxes.
All these fees are permissible deductions from the portfolio and are paid from the dividends that accrue to the portfolio (from the underlying shares in the portfolio) and the other income that accrues to the portfolio (interest and scrip lending income). The balance of the income remaining in the fund after deduction of the permissible fees and costs referred to above is distributed to the holders of the Satrix securities. This distribution is done on a quarterly basis.

Therefore the portfolio expenses are incurred by the investor when the distribution is paid out. For investors to be informed of this cost on a quarterly basis, the unit trust industry uses the concept of a total expense ratio (TER). TER is used to illustrate the costs of portfolios on a comparative basis. Its objective is to endeavour to satisfy the requirement of transparency and to establish an industry standard. The TER of the Satrix Divi for the quarter ended 30 June 2011 is 0.456% (incl. VAT).

In accordance with the industry standard, brokerage and scrip lending income are excluded from the TER. Satrix accordingly also publishes an actual expense ratio (AER), which includes brokerage expenses and scrip lending income.  The AER is therefore the actual cost to the investor. The AER for the quarter ended 30 June 2011 is 0.8911% (incl.VAT)

Satrix Investment Plan and broker fees
Broker fees, financial advisor fees (applicable if a financial advisor has been consulted) and Satrix Investment Plan fees are costs that will be incurred by the investor depending on the investors preferred channel of investment and does not include the portfolio expenses as set out above.

Broker fees and financial advisor fees could vary depending on the broker and/or financial advisor being consulted.

In the case of the Satrix Investment Plan, which is administered by Automated Outsourcing Services (AOS), transaction costs (brokerage) of 0,1% is levied on purchases and sales of Satrix securities. Annual management fees, charged by AOS, are as follows:

Investment Plan Administration Fees

(for both lump sum and debit order investments)


Annual administration fee:

(calculated daily and deducted quarterly)

 
R0 to R100 0000.80%
R100 000 to R250 0000.75%
R250 000 to R1 000 0000.70%
R1 000 000 to R3 000 0000.50%
R3 000 000 or more0.45%


Transaction Fees
Debit order fee: R3.50
Stock brokerage fees: 0.10% (buying and selling)
Nominal Strate and Investor Protection levies will also be charged.
Where a financial adviser is used, commissions will be charged (as scheduled in Section 8).
All fees quoted are exclusive of VAT. VAT will be levied where applicable

Satrix Divi is traded all day on the JSE and its price is subject to trading in the marketplace. The price of Satrix securities can be obtained from any media publication that reports JSE prices.

All settlement, registration, recording and guarantee of trade are done through the normal JSE market systems.

Official market makers have been appointed by Satrix to ensure that investor´s transactions will be accommodated in the market.

Regulation and Disclosure

Satrix Divi is subject to the same regulations, reporting and compliance requirements of any listed company on the JSE. Satrix Divi is also registered as a Collective Investment Scheme and is therefore subject to the regulation of the Financial Services Board. Satrix Managers (Pty) Ltd is registered as a Financial Services Provider.


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