How is the S&P/TSX Composite Index Weighted? (Updated 2024)

The S&P/TSX Composite Index is a strong indicator for the Canadian equities market, but how are securities in the index weighted?

Large, white digital letters reading "S&P/TSX" in front of red and green stock charts.

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The S&P/TSX Composite Index (INDEXTSI:OSPTX) is the principal market measure for the Canadian equities market, and is calculated and managed by S&P Dow Jones Indices.

The index, which was launched in 1977, includes both common stocks and income trust units.

How is the S&P/TSX Composite Index calculated? The weightings of the index’s securities are decided through float-adjusted market capitalization. In this method, market cap is determined by share price and the amount of outstanding shares available to the general public — restricted shares owned by other publicly held companies or company executives are excluded.

What are the S&P/TSX Composite Index's eligibility requirements?

The S&P/TSX Composite Index is reviewed each quarter; at that time, additions or removals can be made. To be eligible for addition, the company needs to be incorporated, formed or established in Canada and must have traded on the TSX for at least six full months.

Additionally, the security must have had a volume-weighted average price of C$1 over the past three months and over the last three trading days of the month end prior to the index committee’s quarterly review. It must also represent a weight of 0.04 percent of the index at a minimum for the last 10 trading days based on its volume-weighted average price.

Stock liquidity, which is measured by float turnover, must be at least 0.5, or at least 0.25 in Canadian volume for dual-listed stocks. Float turnover is calculated by dividing the total number of shares traded over the past year by float-adjusted shares outstanding.

Securities that cannot be included in the S&P/TSX Composite Index include those issued by mutual fund corporations, preferred shares, warrants and all other types of securities that the index committee decides are inappropriate. Securities that have been listed on the TSX for fewer than six months are also ineligible.

Securities may be removed from the index if they fall beneath the index committee’s buffer criteria at the time of the quarterly review. To stay eligible, securities must maintain a volume-weighted average price above C$1 over the three months leading up to a quarterly review. They must also keep a minimum index weight of 0.025 percent three days prior to the review, as well as liquidity of 0.25.

Securities may also be removed at the index committee's discretion at any other time. If a security is removed during the quarterly review it is ineligible for at inclusion for 12 full calendar months unless the committee believes the business has substantially restructured.

What sectors are covered in the S&P/TSX Composite Index?

There are 11 categories of securities included in S&P/TSX Composite Index: financial, energy, materials, industrial, consumer discretionary, telecommunications services, healthcare, consumer staples, utilities, information technology and real estate.

The TSX sector breakdown shows the most constituents in financial and energy followed by the industrial and materials categories. Its performance therefore heavily reflects how those industries are doing, and disturbances in the economy or oil price dips can have a big impact.

Below we’ve broken down each of the 11 sectors as laid out by S&P Dow Jones Indices in its factsheet published July 31, 2024. We have also listed the main players in each category.

1. Financial

The financial market represents 31 percent of the S&P/TSX Composite Index, and its top constituent by weight is the Royal Bank of Canada (TSX:RY,NYSE:RY). The bank provides personal and commercial banking, as well as insurance, corporate and investment banking, transaction processing services and wealth management. Its investment banking services are ranked among the best in the world by several organizations.

2. Energy

The energy sector, which accounts for about 17.7 percent of the S&P/TSX Composite Index, features Enbridge (TSX:ENB,NYSE:ENB) as one of its top constituents by TSX sector weight. Enbridge operates across North America, moving nearly two-thirds of Canada’s oil exports to the US and transporting nearly 20 percent of the natural gas consumed in the US.

The company also operates North America’s largest natural gas utility by volume, Enbridge Gas. Enbridge was an early investor in renewable energy, and has a growing offshore wind portfolio.

3. Industrials

Securities in the industrial category comprise 13.6 percent of the S&P/TSX Composite Index. Canadian Pacific Kansas City (TSX:CP,NYSE:CP) stands tall as the top constituent by weight in this category. Formed after the 2023 merger of Canadian Pacific Railway and Kansas City Southern, this transcontinental freight railway company transports bulk commodities in Canada, the United States and Mexico.

4. Materials

Materials securities make up 12.5 percent of the S&P/TSX Composite Index, and the sector is heavily populated with mining and agriculture companies. One notable company in this category is Nutrien (TSX:NTR,NYSE:NTR), the world's largest potash producer, as well as an agricultural nutrient and equipment provider. It was born out of a merger between Agrium and Potash Corporation of Saskatchewan, which was completed in January 2018.

5. Information technology

Information technology securities comprise 8 percent of the index. Ecommerce platform Shopify (TSX:SHOP,NYSE:SHOP) is a major component of this sector. The widespread platform, which allows retailers to set up their own online storefront, is used by over 2 million sellers including Budweiser, Sephora, Red Bull, Tesla (NASDAQ:TSLA) and Nestle (OTC Pink:NSRGF,SWX:NESN).

6. Consumer staples

Consumer staples represent 4.4 percent of the S&P/TSX Composite Index. One major stock in this category is Maple Leaf Foods (TSX:MFI,OTC Pink:MLFNF), which operates in the meat products and agribusiness sectors. It is Canada’s leading consumer packaged meats company, operating several brands and partnering with many sister brands as well. It exports to more than 20 global markets, including the US and certain markets in Asia.

7. Utilities

Utilities securities register at 3.8 percent of the S&P/TSX Composite Index. Algonquin Power & Utilities (TSX:AQN) is one major representative of this sector. It works in renewable energy such as wind, solar, hydro and thermal, as well as regulated utilities including electricity, water and natural gas. The firm has US$17.6 billion in assets across North America.

8. Consumer discretionary

Around 3.5 percent of the S&P/TSX Composite Index is held by consumer discretionary securities. Dollarama (TSX:DOL,OTC Pink:DLMAF) represents one of the top constituents in this category. The Canada-based company operates discount retail stores and provides a broad range of everyday consumer products, general merchandise and seasonal items, with merchandise at low, fixed price points.

9. Communication services

Telecommunications securities comprise 3.1 percent of the S&P/TSX Composite Index and include companies like BCE (TSX:BCE,NYSE:BCE). BCE is best known for its ownership of Canadian telecommunications property Bell, which has the second highest market share in Canada.

10. Real estate

The real estate sector occupies 2.1 percent of the S&P/TSX Composite Index. First Capital Real Estate Investment Trust (REIT) (TSX:FCR.UN) is one of the securities involved in this space. The company specializes in hybrid properties combining living space with retail and commercial spaces.

11. Healthcare

Healthcare securities make up 0.3 percent of the index. One of the companies represented is Bausch Health (TSX:BHC,NYSE:BHC), a multinational pharmaceutical company that develops, manufactures and markets drugs targeting skin diseases, gastrointestinal disorders, eye health and neurology.

FAQs for the S&P/TSX Composite Index

How to invest in the S&P/TSX Composite Index?

As with most indexes, it's not possible to invest directly in the S&P/TSX Composite Index. Investors can take positions in individual stocks held by the S&P/TSX Composite Index, but there are better options. Several investment vehicles offer exposure to the performance of the index. Exchange-traded funds (ETFs) such as the iShares Core S&P/TSX Capped Composite Index ETF (TSX:XIC) offer one route, as do mutual funds such as the MDPIM S&P/TSX Capped Composite Index Pool.

Is the S&P/TSX Composite Index a good investment?

Canada consistently ranks among the world's top 10 economies, and closed out 2023 with a GDP of $1.89 trillion. As the premier indicator of market activity in the Canadian stock market, the S&P/TSX Composite Index provides a stable, diverse portfolio of many of the country’s best blue-chip stocks in key industries, including energy, resources, banking and retail.

What is the combined market cap of all the companies in S&P/TSX Composite Index?

As of July 31, 2024, the S&P/TSX Composite Index had an adjusted market cap of more than C$3.668 trillion.

This is an updated version of an article originally published by the Investing News Network in 2014.

Don’t forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, currently hold no direct investment interest in any company mentioned in this article.

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Melissa Pistilli

Educational Content Specialist

Melissa Pistilli has been reporting on the markets and educating investors since 2006. She has covered a wide variety of industries in the investment space including mining, cannabis, tech and pharmaceuticals. She helps to educate investors about opportunities in a variety of growth markets. Melissa holds a bachelor's degree in English education as well as a master's degree in the teaching of writing, both from Humboldt State University, California.

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