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The second quarter reports of the first batch of equity funds are released, and the dividend sector is a hot topic for fund managers.

For example, Liu Yuanhai, a well-known fund manager under Soochow Fund, which has always paid attention to the TMT sector, said in the second quarter report that "dividend assets and technology performed relatively well in the second quarter. There may be structural opportunities in the second half of the year, which will be the focus of attention."

Taking the CSI Dividend Index as an example, although the index has recorded positive returns so far this year, it has retreated significantly since late May. Industry insiders believe that the increase in trading congestion in the sector, the rapid decline in dividend yields, and the profit-taking of some funds are all reasons for the recent poor performance of the dividend sector's stock prices.

How are the fundamentals of individual stocks in the dividend sector, which is favored by many investors? The reporter of China Business News found that as of July 16, among the 100 stocks in the CSI Dividend Index, 16 stocks released their 2024 interim performance forecasts, of which 1 expected to increase, 1 expected to reduce losses, 9 expected to reduce, 3 expected to make losses for the first time, 1 expected to increase losses, and 1 expected to make a small loss.

Fund managers have "clicked to pay attention"

The second quarter report shows that Liu Yuanhai's Soochow Mobile Internet Hybrid Fund had a second quarter yield of 11.41%, 12.69% higher than the benchmark (calculated based on A shares, the same below); Soochow New Energy Vehicle Stock had a second quarter yield of 5.09%, outperforming the benchmark by 13.22%.

Dongwu Mobile Internet Hybrid Fund once won the third place in the annual return of equity funds in 2023 with a full-year net value yield of 44.94%. In the first half of this year, its performance continued to lead the market. According to iFinD data, its performance in the first half of the year reached 20.41%.

The outstanding performance also led to a surge in its size. As of the end of the second quarter, the fund's combined share size reached 3.705 billion yuan, a month-on-month increase of 72%.

In contrast, the size of Liu Yuanhai's other fund, Soochow New Energy Vehicle Stock, declined slightly, shrinking by about 13% from the end of the previous quarter to 285 million yuan.

In the second quarter report, Liu Yuanhai, who has always paid close attention to TMT, also turned his attention to dividend assets.

Liu Yuanhai said in the quarterly report: "From the perspective of industry performance, in the second quarter, dividend assets represented by banks, utilities and coal, as well as AI computing power and AI hardware represented by optical modules, performed relatively strongly, that is, dividend assets and technology performed relatively well. We are relatively optimistic about the A-share market in the second half of 2024, and believe that there may be structural investment opportunities, focusing on investment opportunities in technology and dividend assets."

However, his investment in dividend-yielding assets has yet to appear in the “top ten” holdings.

The second quarter allocation strategy of China Europe Jinquan Flexible Allocation Mixed Fund is more clear, focusing on high-dividend assets with stable business models and high-quality cash flows.

Specifically, the main strategy of this fund portfolio is the dividend growth strategy. In addition to the dividend yield requirement, stock selection also considers dividends and performance growth. When the profits of dividend assets diverge, the dividend growth strategy may have higher flexibility or be able to obtain more excess returns. Based on the cost-effective valuation of the dividend industry, the allocation of industries such as publishing has been increased.

The net value growth rate of the China-Europe Jinquan Flexible Allocation Mixed Fund, which adopts a dividend growth strategy, was 2.4% in the second quarter. The top ten holdings were greatly changed compared with the first quarter. Specifically, Datang Power Generation and XD Huaneng International were added on the basis of the first quarter, and the remaining eight stocks were all new stocks, namely Xugong Machinery, Yanjing Beer, Zhongyuan Media, Dahao Technology, Anhui New Media, Chifeng Gold, Jiansheng Group and Nanjing Bank. It is worth mentioning that as of the end of the second quarter of this year, the scale of China-Europe Jinquan Flexible Allocation Mixed Fund reached 891 million yuan, setting a new high since the second quarter of 2017.

The Invesco Great Wall Research Team told the First Financial reporter that in the current weak recovery and low interest rate environment, short-term dividend style may continue to dominate. There is a lack of consensus on the total level of market trading logic, and the main line is relatively vague. At present, industries that can maintain high growth and high prosperity are relatively scarce, and it is more difficult to obtain excess returns with prosperity as an anchor. Dividend assets with stable profits and strong ability to resist market fluctuations are expected to continue to outperform.

Institutions are still optimistic about the value of configuration

How are the performance and stock price performance of the dividend sector, which is favored by many investors?

As of July 16, the CSI Dividend Index, a representative index of dividend assets, has risen 5.91% this year, but has retreated significantly recently. After reaching its high of 5806.63 on May 22, the CSI Dividend Index has retreated 8.57% so far.

Morgan Fund believes that, first of all, dividend assets have continued to rise against the trend this year, attracting more gambling funds to enter the market, which has increased the trading congestion of the sector and rapidly reduced the dividend rate, thus exacerbating the volatility of the short-term sector market. After the recent correction, the transaction volume of the dividend sector has continued to decline, indicating that short-term funds have begun to retreat and trading congestion has decreased. At the same time, the dividend rate of the dividend sector has begun to stabilize and rise again.

Secondly, the dividend sector has a "calendar effect". Generally speaking, listed companies pay dividends once a year and disclose dividend plans when releasing annual reports, but the dividend plans need to be approved by the shareholders' meeting. Because the annual report needs to be disclosed before the end of April every year, but the disclosure time of different companies is different. For example, some companies disclose in January and may receive dividends in March, but if the annual report is disclosed at the end of April, some may not receive dividends until June after the shareholders' meeting approves it.

Therefore, the dividends of A-share listed companies have obvious seasonality. During this period, most listed companies will implement cash dividends, which may then trigger some funds to take profits, thus bringing downward pressure on the prices of related assets. For example, based on the monthly performance of the CSI Dividend Index in the past 15 natural years, the proportion of positive returns of the CSI Dividend Index from April to June was relatively low.

Morgan Funds said that after the correction, the allocation value of dividend assets is still significant. In the long run, asset prices fluctuate around value. As of July 12, the 10-year Treasury bond yield was 2.26%, while the dividend rate of the CSI Dividend Index (in the past 12 months) was 5.86% during the same period. In contrast, the dividend rate of the dividend index is outstanding and the allocation value is relatively high.

In addition, the demand for dividend assets may not decrease. From the perspective of medium- and long-term allocation, in the current asset shortage environment, assets with relatively stable and continuous dividends such as dividend assets have attracted the attention of long-term allocation funds, and the demand for dividend assets may still be large in the future.

Liu Jun, Assistant General Manager and Director of Index Investment Department of Huatai-PineBridge Fund Management, said that the current market generally agrees that the dividend strategy is highly compatible with the new "National Nine Articles". This compatibility stems from the essential characteristics of dividend assets, that is, they need to have stable profits and cash flow and be able to continuously give back to investors, which coincides with the core concept of investor-oriented emphasized in the new "National Nine Articles". Therefore, the new "National Nine Articles" can be regarded as an important support for the dividend strategy.

Liu Jun believes that in the long run, more attention should be paid to the scarcity of dividend assets in the market and the long-term investment value behind them.

As of July 16, a total of 16 stocks in the CSI Dividend Index released their 2024 interim performance forecasts, among which Magang Group (600808.SH) reduced its losses, China Shenhua Group (601088.SH) suffered a slight loss, three listed companies including Vanke A (000002.SZ) suffered their first losses, nine listed companies including Tianjian Group (000090.SZ) expected a reduction in profits, Luxi Chemical Industry (000830.SZ) expected an increase in profits, and Sangang Minguang (002110.SZ) increased its losses.