Dividends are an important source of returns for investments in listed companies, and long-term stable cash dividends are a significant indicator to for the investment value assessment of listed companies. In order to strengthen the requirement for the continuity and stability of dividend distribution and expand the capacity for index-based investments, the Shanghai Stock Exchange (SSE) has recently revised the methodology for compilation of the SSE Dividend Index.
Launched in 2005, the SSE Dividend Index aims to reflect the overall performance of the SSE-listed high-dividend securities by selecting 50 SSE-listed securities with high cash dividend yields, relatively stable dividend distribution and certain scale and liquidity as the constituents of the index. The average historical dividend yield of the SSE Dividend Index at about 4% is higher than those of the conventional broad-base indices. From the perspective of long-term performance, the annualized returns of the SSE Dividend Index have been higher than those of the SSE Composite Index since its base date. With significant excess earnings recorded in 2022, the accumulated yield has stood at 3.78% since the beginning of the year. As an important measure to adapt to the market demands and serve the investors, the revision of the compilation methodology is expected to give better play to the role of the SSE Dividend Index in facilitating the investors’ investment in the securities of high-dividend listed companies as well as meeting the requirements for diversification, stability and tradability.
In recent years, the SSE has continuously issued relevant guidelines to encourage listed companies to distribute dividends. Not only has the number of the SSE-listed companies distributing cash dividends and the total amount of the dividends continued to grow, but also there has been a group of companies characterized by the tradition of long-term stable distribution of cash dividends. At present, the total annual cash dividend of the SSE market at about RMB 1 trillion, with the dividend yield at 2.22%, is roughly equivalent to that of the S&P 500 Index and the Dow Jones Industrial Average. Based on overseas experience, in the process of market development, the listed companies with sound fundamentals, expected continuous improvement in cash flow and adaptation to the transformation and development of the economic structure are the best targets for investors to make long-term value investments. The SSE Dividend Index with these companies as the main constituents will serve as an effective instrument contributing to the investors’ long-term value investment, and encourage a large number of listed companies to enhance social responsibility and shareholders’ awareness.
Currently, there are nearly 20 dividend index products on the market, with a combined size of over RMB 30 billion. Among them, the SSE Dividend Index is the largest, with the total scale of the products tracking the index at more than RMB 18 billion, about 60% of the size of the dividend index-based products in the entire market, and the scale continues to grow.
Attachment:
Announcement on Revising the SSE Dividend Index Compilation Methodology
