Since the beginning of this year, the Shanghai Composite Index has regained 3,100 points after experiencing the "deep V" market after a downward shock, but many people still have concerns about the direction of equity investment. In addition, the yield on 10-year Treasury bonds to maturity was 2.29% at the end of the first quarter of 2024, and defensive investment demand may also be looking for new ways amid the downward trend in interest rates.
In the current market, should investment be "in" or "out"? This question is a question that many investors have.
Before answering this question, a well-known fable may be instructive - an eagle caught a little nightingale for dinner, and the nightingale, seeing that his life was about to die, tried to convince the eagle, "I'm too small, go catch a bigger bird." The eagle replied, "I would be foolish if I let go of this nightingale that I already had in my hands in order to catch a bigger bird."
This fable is derived from the famous quote of the great philosopher Socrates: "It is better for a flock of birds to be in the forest than a bird in the hand", and aims to express that there are more things than uncertainties, and that what is finite but more certain may be more valuable. In investment, there is also such a widely circulated "bird in hand" theory - that is, dividend investment.
The "bird in hand" in investment, what is the dividend strategy
The dividend investment strategy, also known as the high dividend strategy and dividend investment strategy, focuses on the dividend ability of listed companies. In other words, the dividends that can be paid consistently and steadily by high-quality companies may be easier for investors to grasp the "bird" in their hands. Dividend investment is to strive for sustainable capital appreciation and long-term returns for investors by investing in high-quality companies with relatively mature business models, excellent profitability, stable cash flow and stable dividend policies.
Taking the CSI Dividend Index and the Hong Kong Stock Connect High Dividend Index as examples, we can also find that the dividend strategy tends to be deployed in more mature industries and more mature large companies. Taking the historical data of the major mainstream dividend indices of A-shares and Hong Kong stocks as an example, we can find that the dividend strategy reflects relatively better historical performance than the broad-based index as a whole.
Industry distribution of CSI Dividend Index constituent stocks
The market capitalization of the constituent stocks of the CSI Dividend Index and the Hong Kong Stock Connect High Dividend Index
The rise and fall of the mainstream dividend index in the past 1, 3, 5 and 10 years
Data source: WIND, as of 2024/3/31, the CSI Dividend Index is only used as an example of a dividend theme strategy, and the listed companies involved are only examples of constituent stocks, and do not involve investment advice. Past performance is not indicative of the future, and funds should be invested with caution.
Look at the history of the two sets of data and understand the characteristics of the bonus strategy
Looking back at the historical data, we can also observe the cost-effectiveness characteristics of the dividend strategy under different market conditions. On the one hand, from the perspective of historical market, the dividend strategy has outperformed the overall performance of the market in the long run, and the investment cost performance in the volatile market is particularly obvious. In the past three years, the CSI 300 Index fell by 29.09%, while the CSI Dividend Index rose by 41 percentage points over the CSI 300 Index over the same period, recording a positive return of 11.47%.
Data source: WIND, as of 2024/3/31, the CSI Dividend Index is only used as an example of a dividend theme strategy, the fund has not yet been established, historical performance does not represent the future, and the fund investment should be cautious.
The other side of the equity experience comes from volatility control. As of the end of the first quarter of 2024, the dividend strategy has shown the characteristics of lower volatility and smaller drawdown in various time intervals of the A-share and Hong Kong stock markets.
Data source: WIND, as of 2024/3/31, the CSI Dividend and Hong Kong Stock Connect High Dividend Index are only used as examples of dividend theme strategies, historical performance does not represent the future, and fund investment should be cautious.
Choosing a dividend investment? Looking at the future in terms of valuation and policy
It is worth noting that since the beginning of 2024, the dividend strategy has still performed relatively well, taking the CSI Dividend Index as an example, as of May 10, 2024, it has gained 12.1%. When some people don't know how to "advance and retreat" in investment, they still have questions: "Is dividend investment still worth choosing?" ”
In this regard, if you look at the data, the high-dividend assets represented by the dividend style are still in the reasonable valuation range. As of the end of the first quarter of 2024, the price-to-earnings ratio of the CSI Dividend Index is 6.73 times, which is still lower than several broad-based indices and lower than the 66.36% of the index in the past ten years. The dividend yield of 5.39% is also significantly higher than the broad-based level and higher than the 79.78% of the index in the past decade.
Data source: WIND, as of 2024/3/31, the CSI Dividend Index is only used as an example of a dividend theme strategy, the fund has not yet been established, historical performance does not represent the future, and the fund investment should be cautious.
On the other hand, under the guidance of the new "National Nine Articles" and other policies, dividend investment may also receive institutional benefits. On April 12, 2024, the State Council issued the "Several Opinions on Strengthening Supervision and Risk Prevention and Promoting the High-quality Development of the Capital Market", which is divided into 9 parts, known as the new "National Nine Articles", which focuses on strengthening the supervision of cash dividends of listed companies, restricting the reduction of major shareholders and implementing risk warnings for companies that have not paid dividends for many years or have a low dividend ratio; Increase incentives for high-quality companies with dividends and take multiple measures to promote the increase of dividend yields, which will help form more effective market constraints and promote the stable and healthy development of the capital market. In addition, on December 15, 2023, the China Securities Regulatory Commission (CSRC) also issued the Regulatory Guidelines for Listed Companies No. 3 - Cash Dividends of Listed Companies, which further clarifies the guidance of cash dividends and promotes the increase in the level of dividends. Simplify the interim dividend payment process and promote further optimization of the dividend payment method and rhythm; Strengthen the constraints on enterprises with abnormally high proportion of dividends, guide reasonable dividends, and strive to further improve the normalized dividend mechanism of listed companies. Under the guidance of regulatory policies, with the strengthening of the shareholder return awareness and dividend system of listed companies, dividend investment is also expected to be well accumulated in the institutional framework.
Investment is a long road, and in the face of market uncertainty, "in" and "out" may be an eternal topic for many ordinary investors. Therefore, it may also be a good choice to choose the "bird in hand" in investment and pursue a relatively more certain direction with a dividend strategy. As Zhang Xiaofeng, the proposed fund manager of the Industrial Securities Global Dividend Mixed Fund, said, "Dividend investment is an investment that pursues certainty. A group of birds in the forest is not as good as a bird in hand, through regular dividends to transfer the cash flow distributed by listed companies to the holders, and strive to create a relatively stable cash flow for the holders, which is more in line with the essence of dividend investment. ”
Risk Warning: Zhang Xiaofeng, the proposed fund manager, has worked as a researcher since April 2011. He is currently the fund manager of Xingquan CSI 800 6-Month Holding Index Enhanced Fund (co-managed with Shenqing since May 24, 2021). The performance data has been reviewed with the fund custodian. Fund manager Zhang Xiaofeng manages all products: Xingquan CSI 800 Index Enhanced A2021/5/24-2024/3/31Cumulative growth and performance benchmark: (-6.04%/-27.39%); 2021/2/9-2021/12/31（2.64%/-6.08%），2022（-10.71%/-19.55%），2023（1.17%/-9.89%）。 Xingquan CSI 800 Index Enhanced C2021/5/24-2023/12/31 Cumulative Growth and Performance Benchmark: (-7.11%/-27.39%); 2021/2/9-2021/12/31（2.28%/ -6.08%），2022（-11.07%/-19.55%），2023（0.77%/-9.89%）。 The time period of "excess income of condominium products exceeding 20% in about 3 years" refers to 2021/5/24-2024/3/31, and the specific performance is as above. Risk Warning: The Fund is a hybrid fund, and the expected return and expected risk are higher than those of money market funds and bond funds, and lower than those of equity funds. The fund manager has rated it R3. The performance benchmark of the Fund is: CSI Dividend Index Yield ×60% + CSI Hong Kong Stock Connect High Dividend Investment Index Yield ×20% + China Bond Composite (Full Price) Index Yield ×20%. The proportion of the Fund's equity assets is 60%-95% of the Fund's assets (of which the proportion of investment in the underlying stocks of the Hong Kong Stock Connect accounts for 0-50% of the equity assets); Invest in dividends-themed equities as defined by the Fund as accounting for not less than 80% of the Fund's non-cash assets; At the end of each trading day, after deducting the trading margin required for stock index futures, treasury bond futures and stock option contracts, the Fund shall maintain cash or the total proportion of government bond investment with a maturity date of less than one year not less than 5% of the Fund's net asset value, of which cash does not include settlement reserves, deposit margins, subscription receivables, etc. For the terms of profit distribution and dividends, please refer to the full fund contract and prospectus of the Industrial Securities Global Dividend Mixed Fund. Note: The dividend clause is not used as a profit guarantee and performance commitment, and the Fund does not necessarily pay dividends every year. Investors should carefully read the fund contract, prospectus and other legal documents of the fund to understand the risk-return characteristics of the fund, and judge whether the fund is suitable for the investor's risk tolerance according to their own investment objectives, investment period, investment experience, asset status, etc., independently judge the investment value of the fund and make investment decisions. Investment is at your own risk. The mainland fund has been in operation for a relatively short period of time and does not reflect all stages of the development of the stock market. The performance of other funds managed by the fund manager or other portfolios previously managed by the proposed fund manager does not constitute a guarantee of the performance of the fund. Past performance is not indicative of the future, and there is a risk of fluctuation in the fund's returns. Funds should be invested with caution and should be chosen carefully.