The Shanghai Stock Exchange issues a new dividend index on Tuesday, the first trading day of this year, to track 50 listed companies with the highest dividend payments. 

The index is designed to track 50 Shanghai-listed companies with the highest dividend payments. Component companies in the index include large blue chips such as Sinopec, Baosteel and Shanghai Automotive, as well as some medium sized companies like Laiwu Steel Corportation and Xiamen C & D Incorporation.

The 50 companies, with an average cash dividend of about 2.3 per cent contribute more than half of the dividends paid by Shanghai's listed companies last year.

The Shangai Bourse said in an announcement that the index offers investors a new investment tool and a benchmark to trace market trends.

The policy also received a warm response from many experts, who believe the new index may push domestic listed companies to give more return to investors.

A number of listed companies in China do not pay dividends regularly to investors even if they reported profits, and sometimes the corporate profits were misused by controllers of the firms as transparency was insufficient.

A recent statistical report by brokerages showed that the average annual dividend rate from over 1,300 domestically listed companies was under two per cent in the past decade, even lower than the one-year deposit rate.

Although domestic listed companies are giving more emphasis to returns to investors, and the total dividends of Shanghai's listed companies in 2004 were reported to have increased eight percent from the previous year, still, in the eyes of many stock investors, dividends make up a tiny proportion of the profits.

As regular dividend payments are linked with the actual performance and quality of the listed firms, so the new index is expected to offer investors, especially those seeking long-term investments, a criteria for investments.

The Shanghai bourse says it will adjust the components companies in the index at the end of each year, and up to 20 per cent of the constituent stocks are to be replaced each year.

Source: CRIENGLISH.com