Are the surging dividend stocks still safe?

36Kr Finance

2024-06-03 10:40Published in Beijing

Are the surging dividend stocks still safe?

Author | Huang Yida

Edit | Zheng Huaizhou

Cover source | Visual China

The A-share market fluctuated sideways this week (May 27~31), with the Shanghai Composite Index falling slightly by 0.07% in the five trading days of the week to close at 3086.81 points on the 31st, and the Wind All A Index falling 0.20% this week.

In terms of sectors, only 8 of Shenwan's 31 primary industries rose this week, of which electronics, national defense and military industry, coal, automobiles and other sectors rose first, and real estate, building materials and other sectors rose and fell last this week.

From the style point of view, this week's science and technology innovation and dividends are relatively dominant. Among them, science and technology innovation indices such as Science and Technology Innovation 50, Science and Technology Innovation 100, and Wind Shuangchuang have risen this week in the broad-based and style indexes; Wind Dividend Index and CSI Dividend Index also performed well this week. In contrast, large-cap stocks have been relatively lonely this week.

Chart: The trend of the Shanghai Composite Index this year; Source: wind, 36 krypton

In terms of Hong Kong stocks, the Hang Seng Index fell 2.84% this week, from late May to mid-May, the Hong Kong stock market rose for a month, and since May 21, it has entered a period of adjustment; The Hang Seng Tech Index fell 2.86% for the week, with a short-term trend similar to that of the broader market. In terms of sectors, among the 12 Hang Seng industry indexes, only two industries, energy and telecommunications, rose this week, followed by comprehensive, real estate and construction, information technology and other industries.

In terms of US stocks, there was some divergence, with only the S&P 500 rising this week among the three major indexes.

01. Prudence is still the key word for A-share investors

Looking back at the trend of A-shares in May, it can really be said that it was a "over the hill", and the rise in the early stage was mainly driven by the increase in the real estate policy and the relatively good economic expectations in the second quarter. The expectation that the economy in the second quarter is relatively okay has improved investor sentiment, and it is generally believed that there is no major downside risk in the market in the short term, even if there are some macro and financial data disturbances in the near future, the relatively good sentiment also has a strong tolerance for these events.

Therefore, in May, in the context of the above, the increase in the real estate policy brought a round of event-driven plate market. It can be seen from the trend of the Shenwan real estate index that from April 25, the time of the bottom counteroffensive, there was a two-day sharp rise, then a sideways shock for eight days, and then a three-day sharp rise, and then a three-day sideways adjustment, in this adjustment period on May 22, the index was also pulled to the top of this round of rise, and then entered a continuous downward adjustment.

From the recent month or so, the rhythm of the real estate sector rising and rising, stopping and rising, and stopping can be seen in the two mentalities of current investors:

First, we are more cautious about policy stimulus than before. This kind of caution still stems from the "muscle memory" formed over the years of the epidemic, especially paying more attention to the rhythm of policy implementation. On the other hand, the durability of investors to policy stimulus has decreased significantly, and many peers jokingly say that "the policy market is only three days", so after "three days", it can be understood that you can leave the market after the good is cashed, and this mentality is essentially the result of cautious + money-making effect.

Second, it is also relatively cautious about earnings expectations. The cautious mentality of income expectations mainly stems from the current economic expectations, it is difficult to improve the beta upward, and it is unlikely to be a downside risk, so the risk appetite has indeed improved compared with last year, but it is not much, which leads to investors although they are also trying to attack, but the income expectations for each transaction are lower than before, and the investment cycle is shorter, which is reflected in the disk, which is a significant acceleration in the rotation of the plate, and the lack of obvious investment main line, and this phenomenon echoes the current macro environment.

When it comes to risk appetite, we have to mention the two ultra-long-term special treasury bonds issued in late May, which were quite popular and were quickly snapped up as soon as they were put on the shelves. As a result of the hot market, the winning interest rates of the two ultra-long-term treasury bonds are relatively low, with the coupon rates of the 30-year and 20-year bonds being 2.57% and 2.49% respectively. From the perspective of the long-term valuation of ultra-long-term treasury bonds, the coupon rates of these two treasury bonds are close to the top of the long-term valuation, so there are still risks at the future transaction level.

Chart: 20- and 30-year Treasury yields; Source: wind, 36 krypton

It can also be seen from the high valuation of investors to allocate treasury bonds, the current risk appetite of the entire market is still at a low level, although there is a significant improvement compared with last year, but the mentality is still based on not losing and earning. There was an obvious seesaw effect in the performance of stocks and bonds in late May, which once again confirmed the overall cautious mentality of the market from the level of major assets.

02. Re-examine the risks of the bonus strategy

Investors' cautious mentality is reflected in the strategy is to continue to focus on defense, so the dividend strategy as a traditional defensive strategy has been favored by investors since last year, and it is still a safe haven for many funds.

Chart: Wind Dividend Index trend since the beginning of this year; Source: wind, 36 krypton

The influx of funds has led to the valuation of dividend stocks rising to varying degrees compared with the previous lows, which has led to the fact that the dividend strategy with strong defensive attributes in the past has become less pure. Because one of the core points of the dividend strategy is that the valuation should be low enough, and the stock itself has strong resistance to decline, then the income brought by dividends is a bit similar to the meaning of fixed income, so some people call the dividend strategy an investment strategy to earn "debt" income from stocks.

However, the current problem is precisely due to the uncertainty of the main line of the industry, resulting in a large number of funds crowded in dividend stocks, and in the case of little downside risk in the market, the current dividend strategy has a semi-offensive nature. It is true that the rise in valuation has brought capital gains, but the disadvantage is that dividend stocks have obvious downside risks, especially since the beginning of this year, the best industry sectors are banks and coal, two large dividends, so once there is an adjustment, the characteristics of dividend strategy fixed income will be broken, and the effect of defense will be greatly weakened.

03. Investment strategy

In terms of strategy, by tracking the financial reports of listed companies, it can be seen that the overall capital expenditure growth rate of A-share listed companies has further declined, which essentially reflects the current situation of insufficient aggregate demand. Therefore, when the willingness of listed companies to spend capital is not strong, the cycle has now entered the stage of digesting supply, and the corresponding profit growth of listed companies will be relatively stable in the future.

At this stage, quality factors such as earnings growth, growth stability, earnings quality, and capital structure can be used as key references for stock selection. The company portrait depicted by these quality factor combinations is probably a company with high profitability, low debt, and stable profitability, and the indicators referenced for stock selection include valuation indicators such as ROE and ESP, as well as their corresponding volatility indicators.

Considering the current situation of loose liquidity at the macro level and a downward shift in interest rates, but the demand for financing has fallen, high-yield assets will be relatively scarce in the future. Therefore, for the allocation suggestions in June, it is still mainly defensive, and large-cap stocks, companies with low valuations and stable earnings are the first choice; The dividend strategy is still recommended, but be aware of its valuation risk. In terms of industry allocation, you can follow the above stock selection ideas and pay attention to coal, electricity, banking, non-ferrous metals and other sectors; Technology has to wait for specific industry catalysts.

*Disclaimer:

The views expressed in this article are those of the author.

The market is risky, and investors need to be cautious. Under no circumstances does the information or opinions expressed herein constitute investment advice to any person. Before deciding to invest, investors should consult professionals and make prudent decisions if necessary. We do not intend to provide underwriting services or any services that require certain qualifications or licenses to be performed by parties to a transaction.

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