Launch of 11 New Total Return Indices Including Dividend Income

Combining Price Earnings and Dividend Yields... Potential for Excess Returns Over General Price Index

[Asia Economy Reporter Minwoo Lee] The Korea Exchange is set to introduce 11 new total return indices (TR) that calculate total returns by adding dividend yields.

The Exchange announced on the 22nd that it will start publishing these 11 "KOSPI 200 Sector Total Return Indices (TR)" from the 27th.

Total return indices combine price returns and dividend income. They are calculated as total returns including dividend yields, assuming that all dividend income is reinvested into the existing constituent stocks. Due to the compounding effect of dividend yields, these indices can generate excess returns compared to the regular price return (PR) indices. This move is in response to growing interest in TR indices amid the expansion of dividend investing.

In fact, the KOSPI 200 Information Technology TR index recorded an excess return of 16.26 percentage points from 2011 through the end of 2022. Even foreign investors, who had been net sellers of Korean stocks amid the recent COVID-19 pandemic, increased their net purchases of TR-listed exchange-traded funds (ETFs).

(Provided by Korea Exchange)

As dividend payouts are expected to continue increasing, the excess returns of total return indices are also projected to grow. A Korea Exchange official explained, "With the Exchange offering a variety of total return index product groups, the diversification of ETFs based on total return indices will expand investors' choices and activate the related market."

This content was produced with the assistance of AI translation services.