S&P/TSX Composite Index
S&P/TSX Composite index:
24,413.94
What You Should Know
- S&P/TSX Composite Index is the premier indicator of market activity for the Canadian stock market.
- In terms of number, the S&P/TSX Composite Index includes 13% of TSX-listed entities but 31% of TSX-listed corporations.
- In terms of market capitalization, S&P/TSX Composite includes 79% of the Toronto Stock Exchange (TSX) as of 30 June, 2024.
- S&P/TSX is investable both through Canadian ETFs and Canadian mutual Funds.
S&P/TSX Composite Index is the Canadian equivalent of the S&P 500 in the US. It acts as a barometer for the health and wellbeing of corporate Canada and, as such, is closely followed and reported in the Canadian financial news.
This index used to be called S&P 300, and resource extraction corporations dominated TSX. Currently, the financial sector dominates the index. S&P/TSX Composite can be followed using the ticker symbol ^GSPTSE or SPTSX. Its performance since inception is depicted in the graph above. However, note that the rise in the index does not embody the full performance of index constituents. We need to consider the S&P/TSX Composite Index (Total Return) to see the return provided by index constituents. The calculation of the total return index assumes that dividend distributions are used to purchase index constituents proportional to their weight in the index. The S&P/TSX total return index over the past decade is graphed below.
Unfortunately, even the total return index is not a good representation of the return investors could achieve because investors have to pay income tax on their dividends before reinvesting them. The S&P/TSX Composite Index Net Total Return has been developed to address this issue partially. A net total return index is very similar to a total return index, with the difference that it assumes the investor has paid the withholding tax on their dividends before reinvesting. Withholding tax is part of the investment income of non-residents, which should be submitted to tax authorities. The rate of withholding tax in Canada is 25%. The tax rate for domestic investors can be significantly higher as they have to pay provincial income tax as well.
Long Term Return
Currently, the S&P/TSX Composite Net Total Index stands 5.2 times its value at the beginning of 2000. This translates to an annualized return of 6.9% over the past 24 years. TSX has returned 9.7% annualized over the past ten years.
TSX stands for the Toronto Stock Exchange, which is among the ten largest exchanges in the world. There are 1806 companies listed on the Toronto Stock Exchange with a total market capitalization of $4.39 trillion at the end of June 2024. Individuals cannot independently buy stocks on a stock exchange; they need to use a trading platform to have their broker perform their trades.
Two hundred twenty-six of the TSX listed companies are included in the S&P/TSX Composite Index, whose market capitalization is $3,475,265M as of 28 June 2024. S&P used to stand for Standard & Poor’s, but now it is simply the first part of S&P Global’s name. S&P Global is an American corporation specializing in financial information and analytics.
S&P Global is the majority owner of the S&P Dow Jones Indices joint venture. This is the company which has created and maintained many indices, including the S&P/TSX Composite Index. This index is designed with two goals. The first is to represent the TSX and the second is to be investable.
Largest Sectors in TSX
The financial sector constitutes close to one-third (30.7%) of the S&P/TSX Composite Index. The Toronto Stock Exchange's financial sector includes Canadian bank stocks, Canadian insurance stocks and asset managers. Together, the financial and energy sectors constitute almost one-half (48.7%) of the S&P/TSX Composite Index. Sector Weights are as of June 28, 2024.
| Vehicles for Gaining Exposure to S&P/TSX (Representing Canadian listed companies) |
|---|
| XIC - iShares Core S&P TSX Capped Comp ETF |
| ZCN - BMO S&P/TSX Capped Composite Index |
| CIBC Canadian Index Fund |
| XMD - iShares S&P/TSX Completion Index Fund + XIU - iShares S&P/TSX 60 Index Fund |
| XMD - iShares S&P/TSX Completion Index Fund + HXT - Horizons S&P TSX 60 Index ETF |
| Scotia Canadian Equity Index Fund |
To satisfy these goals, the eligibility criteria for this index include:
- Domicile: The company must be domiciled in Canada, and its primary listing must be on the TSX.
- Market Capitalization: Companies must meet minimum market capitalization thresholds, which are reviewed and adjusted periodically to ensure the index remains representative of the Canadian equity market. Companies need to have a market cap relative to the entire index of at least 0.05%.
- Liquidity: Stocks must demonstrate adequate liquidity, usually measured by trading volume and turnover. The trading volume of each security over any year should at least be 0.025% of the trading volume of the index-eligible securities.
| Toronto Stock Exchange | TSX Venture Exchange | |
|---|---|---|
| Listing Fees | $10,000 - $200,000 | $7,500 - $40,000 |
| Accounting and Auditing Fees | $75,000 - $100,000 | $25,500 - $100,000 |
| Legal Fees | $400,000 - $750,000 | $75,000+ |
| Underwriters' Commission | 4 - 6 % | Up to 12 % |
Index weighting is determined by float capitalization. Every March, June, September and December, weights for index constituents are readjusted. TSX is considered the primary exchange in Canada; companies that do not qualify for listing on TSX can list on TSX Venture (Canada’s junior exchange), which also is part of the TMX group.
One can get exposure to S&P/TSX Composite through Canadian ETFs or mutual funds. ETFs and mutual funds are both investment pools but have technical differences. A combination of the XMD - iShares S&P/TSX Completion Index Fund and XIU - the iShares S&P/TSX 60 Index Fund gives complete exposure to the S&P/TSX Composite Index.
HXT - Global X (formerly Horizons) S&P TSX 60 Index ETF is another ETF following the TSX 60 Subindex. Also, XIC - iShares Core S&P TSX Capped Comp ETF and ZCN - BMO S&P/TSX Capped Composite Index ETF own the same securities represented in the S&P/TSX.
S&P/TSX Capped Composite is composed of the same stocks as S&P/TSX Composite, the only difference being that the first would cap the share of any single constituent at 10%. Royal Bank of Canada, with ticker RY, is the largest component of the TSX and has a weight of 6.6% in S&P/TSX (as of August 2024). Therefore, S&P/TSX Capped Composite and S&P/TSX Composite are currently identical.
S&P/TSX 60 Index
60 large TSX listed companies from ten sectors constitute the S&P/TSX 60 index. The S&P/TSX 60 index and the S&P Completion index comprise the S&P/TSX Composite index.
It is also instructive to note the monthly return of this index over the past 37 years. The average monthly return of the index over the past 37 years until August 2022 has been 0.56%. Returns are seen all over the place. Even though the average monthly return of 0.56% annualizes to 6.9%, there are seven months with returns worth less than -10%. These significant negative returns suggest that the S&P TSX is quite a risky investment.
The Canadian S&P Index Committee, in addition to the S&P/TSX Composite Index, maintains the S&P/TSX 60 Index. The S&P/TSX 60 Index is designed to represent leading companies in the leading industries. It is the Canadian component of the S&P Global 1200 index.
The Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange, The Canadian Depository for Securities, Montreal Exchange, and Canadian Derivatives Clearing Corporation are parts of the TMX group.
| Largest Constituents of the S&P/TSX Composite and the S&P/TSX 60 Indices | ||||
|---|---|---|---|---|
| Rank | Constituent | Symbol | Weight in S&P/TSX Comp as of mid-August, 2024 | |
| 1 | Royal Bank of Canada | RY | Financials | 6.6% |
| 2 | Toronto-Dominion Bank | TD | Financials | 4.3% |
| 3 | SHOPIFY SUBORDINATE | SHOP | Information Technology | 3.6% |
| 4 | Enbridge Inc. | ENB | Energy | 3.5% |
| 5 | Canadian Natural Resources | CNQ | Energy | 3.3% |
| 6 | Canadian Pacific Kansas City | CP | Industrials | 3.1% |
| 7 | Brookfield Corp | BN | Financials | 2.8% |
| 8 | Canadian National Railways | CNR | Industrials | 2.7% |
| 9 | Bank of Montreal | BMO | Financials | 2.6% |
| 10 | CONSTELLATION SOFTWARE | CSU | Information Technology | 2.5% |
| 11 | Bank of Nova Scotia | BNS | Financials | 2.4% |
| 12 | Suncor Energy Inc. | SU | Energy | 2.2% |
| 13 | Canadian Imperial Bank of Commerce | CM | Financials | 2% |
| 14 | WASTE CONNECTIONS INC | WCN | Industrials | 2% |
| 15 | MANULIFE FINANCIAL CORP | MFC | Financials | 2% |
| 16 | TC Energy Corporation | TRP | Energy | 1.9% |
| 17 | Alimentation Couche-Tard | ATD | Consumer Cyclical | 1.8% |
| 18 | AGNICO EAGLE MINES LTD | AEM | Materials | 1.6% |
| 19 | BARRICK GOLD CORP | ABX | Materials | 1.4% |
| 20 | INTACT FINANCIAL CORP | IFC | Financials | 1.4% |
Weights and ranking are as of mid-August 2024
Relative success of Canadian companies change the list of most expensive TSX companies. For example, at the beginning of 2022, Shopify was at the top of the list of most expensive Canadian public companies. In August 2022, it was not even amongst the top 17 companies. By August 2024, it had climbed the valuation ladder again and was sitting in the 3rd position.
Companies listed on the TSX are grouped into the energy sector companies, the mining sector, the technology sector, the life sciences sector, the clean technology sector, and diversified industries. The diversified industries sector is divided into five subsectors: communications and media, consumer products and services, financial services, industrial products and services, and real estate.
| Distribution of Market Capitalization Among Sectors Comprising the S&P/TSX Composite | |
|---|---|
| Sector | Index Weight |
| Financials | 31% |
| Energy | 17.7% |
| Industrials | 13.6% |
| Materials | 12.5% |
| Information Technology | 8% |
| Consumer Staples | 4.4% |
| Utilities | 3.8% |
| Consumer Discretionary | 3.5% |
| Communication Services | 3.1% |
| Real Estate | 2.1% |
| Health Care | 0.3% |
Based on MSCI standards, member companies of the index do not provide exposure to controversial weapons, nuclear weapons, civilian firearms and tobacco. Yet it exposes you to oil sand producers.
Index Rebalancing Frequency
Every March, June, September and December, weights for the S&P/TSX composite index constituents are readjusted based on float capitalization. Float capitalization neglects the shares which are held by company insiders. In other words, company weights in the index are determined based on each company’s floating shares multiplied by its share price.
Disclaimer:
- Any analysis or commentary reflects the opinions of WOWA.ca analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
- The calculators and content on this page are for general information only. WOWA does not guarantee the accuracy and is not responsible for any consequences of using the calculator.
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- Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.