PSX launches index for top dividend paying firms

New index more stable, less volatile than others at bourse

KARACHI:

Pakistan Stock Exchange (PSX) on Tuesday introduced the PSX Dividend 20 Index that would help investors to track and invest in top 20 cash dividend-paying companies at the bourse.

Stock market management has been doing test run of the new product for the past 23 months since October 2020.

“The index is relatively more stable and less volatile compared to others at the PSX,” PSX Chief Product Officer Hassan Raza said while speaking at a press conference on the launch of the new index.

“The index has given a return of 30% in 23 months as it surged to 13,000 points compared to its beginning at 10,000 points in October 2020.” In comparison, the benchmark KSE-100 index of the PSX remained flat in the same time period. It closed at 41,860 points on Tuesday against 41,850 points on October 26, 2020.

Raza stated that it was the first fundamental index as it provided financial information about listed companies including dividend yields. Other indexes are based on trading parameters like companies’ trading values.

This is the 14th equity index in a row at the PSX, including the All-Share Index, the KSE-100 Index and the KSE-30 Index.

The new index features companies having dividend distribution history including banks, fertiliser manufacturers, energy, steel and textile firms. The index would be recomposed after every six months.

Companies in the new index have disbursed on an average 20% of their total income in dividend to shareholders, compared to an average of 5-7% in other indexes, Raza said. “Through tracking the PSX Dividend 20 Index, asset management companies may introduce dividend-based mutual funds, exchange-traded funds and future companies later,” he pointed out.

There is a section of traders who mostly make long-term investment in dividend-paying stocks. The index will help them make decision easily. Others make investment in highly risky stocks to earn profit in shape of increase in stock prices.

Published in The Express Tribune, September 7^th, 2022.

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