This article expresses the opinions and analysis of its author and does not necessarily reflect those of ShareSoc. The author accepts no liability for any errors in his analysis – readers should verify the analysis for themselves.
There has recently been some discussion within ShareSoc and SIGnet about the construction of the SIGnet Investors’ Index (SII). A point of debate was whether the SII was biased relative to more conventional and total return indexes because its small- and micro-cap weighting did not take account of the possibly higher contribution of dividends to total return offered by larger cap. stocks. I therefore agreed to undertake some research to discover how dividend yield varied with market cap.
I used SharePad to extract historic yield data for all UK listed and quoted stocks into a spreadsheet, which I then used to perform the analysis. My findings were as follows:
The arithmetic average yield for the shares in the FTSE100 is 2.72%
The arithmetic average yield for the shares in the FTSE All-share is 2.17%
Looking at “penny stocks”, i.e. those with share prices < 10p (296 stocks), I find that the arithmetic average yield is 1.73%. Many pay no dividend but the average is distorted by two outliers with massive yields – CCJS 123% and EDGI 377.8% – presumably these trusts are liquidating.
Looking at all stocks, the top 50% by market cap have an average yield of 1.56%, whereas the bottom 50% have an average yield of 1.74%. This is from a universe of 1848 stocks.
I therefore conclude that yield is NOT strongly correlated with market cap. or share price (except, perhaps, for the FTSE100 which does have a significantly higher than average yield).
Mark Bentley, Director, ShareSoc