December 16, 2022

FTSE TWSE Taiwan Dividend+ Index: Why increase constituents?

In Taiwan, the market capitalisation of the top companies has grown significantly and high performers have typically paid out high dividend ratios. However, despite this growth, the total number of constituents in Taiwan’s high dividend indices has remained the same. As Taiwan’s market continues to grow, we investigated the potential outcomes of increasing the number of constituents in our dividend indices from 30 to 50, and the pros and cons of doing so.

Key findings:

  • Our analysis showed that increasing the number of constituents from 30 to 50 in a high dividend index would not affect long-term performance
  • Having 50 constituents in a high dividend index actually led to lower volatility and stock turnover
  • Increasing the number of constituents can achieve levels of capacity and diversification with only a small reduction in yield caused by the trade-off between yield levels and a greater number of constituents