When a listed company earns profits and distributes a portion to its shareholders, it is called a dividend—a "real cash" return to investors. The dividend yield is the ratio of the company's dividend to its stock price. Assuming the stock price remains constant, the higher the dividend, the higher the dividend yield naturally becomes.

Dividend indices focus on investing in companies with high dividend yields, selecting those with sustainable dividend-paying capabilities. Typically, companies must have paid dividends for three consecutive years to ensure stable dividend income.

For example, the CSI Dividend Index first screens the 4,957 stocks in the CSI All Shares Index for companies with consistent and stable dividends. It applies criteria such as continuous cash dividends over the past three years, an average dividend payout ratio over the past three years, and a dividend payout ratio for the past year all greater than 0 and less than 1. This process selects 1,816 eligible stocks for the sample pool, from which the top 100 stocks with the highest average cash dividend yield over the past three years are chosen as index constituents. Moreover, the index is weighted by dividend yield, meaning stocks with higher dividend yields carry greater weight in the index.

Additionally, some dividend indices consider factors beyond dividend yield, such as stock volatility or valuation metrics, when selecting stocks. Examples include the CSI Dividend Low Volatility Index and the CSI Dividend Value Index.

Specifically, the CSI Dividend Low Volatility Index incorporates a low-volatility factor, including high-dividend stocks with lower volatility to make the index more stable. The CSI Dividend Value Index, on the other hand, integrates valuation factors, adding metrics like price-to-book ratio, price-to-earnings ratio, and price-to-cash-flow ratio to focus on dividend stocks with higher valuation appeal.

Beyond A-share dividend indices, there are also dividend indices targeting high-dividend-yield companies in the Hong Kong market, such as the CSI Hong Kong Connect High Dividend Investment Index and the Hang Seng Hong Kong Connect High Dividend Low Volatility Index.