Pakistan Stock Exchange launched its first dividend-based index in September, 2022. This index, called the PSX Dividend 20 Index is an index based on the fundamentals of listed companies. The index tracks the performance of the top 20 dividend paying companies at PSX. The companies in the index are ranked and weighted based on their trailing 12-month dividend yield. This index is particularly helpful for investors in that it identifies high dividend yielding companies and facilitates investors in evaluating their investment portfolios. Individual investors, fund managers, Asset Management Companies, and investment banks, among others, can all benefit from this index.
Dividend is the payout that a corporate entity may choose to pay from its profits or surplus to its shareholders. Dividends are usually paid in cash and their frequency may be quarterly, semi-annually or annually. A company’s dividend policy is declared by its Board of Directors.
To add to the knowledge of novice investors, dividend yield is the financial ratio used to measure the percentage return received from the dividend relative to its market price. It is the percentage dividend return earned by the investor. The formula for dividend yield is: Annual dividends per share/ Price per share.
The PSX Dividend 20 Index is rebalanced/ recomposed on a semi-annual basis. It serves as a benchmark for high income-seeking equity investors and for those market participants who are invested in high dividend yield stocks. The PSX Dividend 20 Index presents a ready stock selection in that investors do not have to have to research all listed companies to identify high dividend paying stocks. The PSX Dividend 20 Index thus saves time for investors who are looking to invest in high dividend yielding stocks.