ASX 20 represents the largest 20 companies listed on the Australian Stock Exchange. Similar to other ASX indices, S&P/ASX 20 is a market capitalization index in which the size of individual companies in the index is based on its size relative to the aggregate value of all of the companies in the index.
Top 20 ASX Companies
|Rank||Name||ASX||Size||Index %||P/E Ratio|
|2||Commonwealth Bank of Australia||CBA||$113.35 Bil||12.36%||11.60|
|4||Westpac Bank||WBC||$62.12 Bil||6.78%||12.90|
|6||Australia and New Zealand Bank||ANZ||$51.11 Bil||5.57%||12.30|
|5||National Australia Bank||NAB||$57.15 Bil||6.23%||16.10|
|12||Rio Tinto||RIO||$36.00 Bil||3.93%||13.20|
|14||Newcrest Mining||NCM||$24.85 Bil||2.71%||28.10|
|16||Woodside Petroleum||WPL||$21.85 Bil||2.38%||41.50|
|18||Insurance Australia||IAG||$13.89 Bil||1.51%||16.80|
The list shows that in order to qualify to be included in the index, the equity value of the company must be greater than $10 billion. The average size of the companies in the index is around $30 to $40 billion dollars but even in this instance it is weighted to towards the mega caps stocks.
As it can be seen from the list the companies in the index is definition the most well known and largest companies in Australia.
ASX 20 Index Fund
Blackrock provides investors a low cost index fund option, iShares S&P/ASX 20 ETF (ASX:ILC) to track the performance of the index. The advantage of the ILC exchange traded fund is the low management fee is on 0.24% per annum and daily liquidity so it is a efficient means of exposure to a portfolio of 20 biggest companies.
As most of the earnings of the companies in the index are sourced from Australia, the dividends paid are consistently 80% to 90% franked. This means that the distribution of ILC have a higher level of franking credit than broader market indexes like ASX:STW (ASX 200 index fund).
ASX 20 Sectors
One of the major issues investing in the Australia market is limited sector diversification. The ASX Top 20 is a good representation of this as it is dominated by 2 sectors, financials and resources. Almost 50% of the index is made up of these 2 sectors.
The other sectors in the index are made up of single company exposures. Telecommunication is represented by Telstra, Health by CSL and Energy by Woodside.
While investors should be aware of the concentration risk in the index. The history of the index shows the returns broadly mirrors the other major Australian equity indices.
This is due to considerable overlap between the indices as companies in the ASX20 are included in the ASX 50 and those that are in the ASX 50 are included in the ASX 100 and so on.
Hence the larger market indices are weighed down by the largest companies. The common factor in the returns are due to exposure to the same factors or sectors such as miners and banks.
ASX 20 Dividend Yield
Dividends are paid quarterly in January, April, July and October. The dividend yield is broadly equivalent to the market dividend yield.
|Payment Date||Cents per Unit|