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a-share high-dividend assets have experienced a significant correction. some institutional investors believe that due to the excessive concentration of funds in the dividend sector, trading was too crowded, and the semi-annual reports of some heavily-weighted stocks fell short of expectations, causing a certain degree of market stampede.

however, the impact of dividend strategy on a-shares is gradually deepening. after the dividend strategy became popular, in order to meet the cash flow needs of large funds such as insurance, listed companies have also been constantly adjusting their shareholder return strategies. increasing the dividend amount and increasing the number of dividends within the year have become the common choice of more and more listed companies.

many market participants said in an interview with securities china that as the market's understanding of dividend assets deepens, listed companies will pay more attention to shareholder returns and improve the return on investment in the capital market. increasing the number and scale of dividends paid by listed companies can greatly increase the attractiveness of listed companies to long-term funds, thereby attracting more funds into the market.

dividend strategy hits a snag

with the support of all parties in the market, the high dividend strategy has been increasingly sought after since the middle of last year, and stocks in sectors such as hydropower, coal, and highways have continued to rise. a typical stock, yangtze power, has risen for 11 months in the following 12 months since august last year, with a share price increase of more than 50%, which has been envied by the market.

however, after the stock price reached 31.44 yuan in july this year, china yangtze power began to pull back. as of september 20, it was reported at 28.15 yuan per share, a pullback of about 10%.

yangtze power is just one example. since the middle of the year, the market's recognized high-dividend sectors, including coal and hydropower, have all experienced significant corrections. the coal leader china shenhua once pulled back more than 20%.

"the current adjustment of the dividend sector is more due to the high short-term trading congestion and the possible decline in the prosperity of some industries," said deng lijun, chief strategy analyst at huajin securities, to china securities journal. the current high-dividend sector is already crowded in the short term, and the current historical percentile of the turnover rate of the dividend index has exceeded 70%, and the transaction volume accounts for about 5% of the total a-share transaction volume. in terms of holdings, the historical percentile of high-dividend sector funds also exceeds 80%.

xu chi, chief strategy analyst at china securities, also believes that funds were previously over-concentrated in the dividend sector, resulting in overly crowded trading, and the semi-annual reports of some heavily-weighted stocks fell short of expectations, causing a certain degree of stampede in the market.

however, dividend assets are still favored. xu chi believes that the pursuit of dividend assets by institutional investors is essentially a risk-averse demand under a prudent mindset. considering that the current stability of the aggregate policy and the direction of strong financial supervision have not changed, we expect that conservative styles such as dividends will still be the dominant style in the second half of the year.

yang chao, chief strategist of galaxy securities, also believes that from the current macroeconomic background, the global interest rate cut environment can actually enhance the attractiveness of dividend assets, and stocks or assets with high dividend payments are more attractive because of the relatively high yields they provide. therefore, despite the market rotation, dividend assets can still attract long-term holders due to their higher profitability.

listed companies cater to dividend demand

the impact of dividend strategy on a-shares is gradually deepening. after the dividend strategy became popular, in order to meet the cash flow needs of large funds such as insurance, listed companies have also been constantly adjusting their shareholder return strategies. increasing the dividend amount and increasing the number of dividends within the year have become the common choice of more and more listed companies.

in this year's semi-annual report, more than 670 companies released mid-term cash dividend plans or plans for 2024, involving a total dividend amount of nearly 530 billion yuan. the number of listed companies planning mid-term dividends has exceeded the total of the previous three years, and the total dividend amount has also reached a historical high.

"under the current macro-environment and policy orientation, mid-term dividend stocks with advantages such as stable cash flow, high short-term profit certainty and reinvestment are more likely to be favored by investors," said deng lijun.

he believes that mid-term dividend stocks have the advantages of stable cash flow, high certainty of short-term returns, and reinvestment. institutional investors such as public funds, pension funds, and insurance companies usually pay more attention to long-term and stable cash inflows, while mid-term dividend stocks can provide stable cash returns and enhance the risk resistance of the investment portfolio, especially in the current context of overall weakness in the market. dividends provide a certain return guarantee. mid-term dividends can also allow institutional investors to realize part of the returns in a relatively short period of time and enhance the certainty of short-term returns. in addition, institutional investors can continue to increase their holdings of high-quality assets by reinvesting dividends.

xu chi also explained to the securities china reporter that institutional investors who prefer low-risk, long-term investments value stable cash flow and regular income returns more, and stocks with mid-term dividends or multiple dividends a year have more stable overall returns and relatively lower dividend risks, which are more in line with the "stable" requirements of such investors.

on the other hand, the overall profitability and cash flow health of stocks with interim dividends can be guaranteed, and interim dividends can be used to optimize the company's capital utilization efficiency. the overall quality of such listed companies is relatively better.

"interim dividends, as a form of capital return, can provide more frequent cash inflows and increase investors' financial flexibility. for institutional investors, frequent and predictable cash flows are important factors in managing large-scale funds, helping them better allocate funds and optimize the capital allocation of their investment portfolios." yang chao said.

promoting a-shares into a virtuous cycle

dividend strategies and listed companies’ behaviors reinforce each other, which can further improve the a-share ecosystem and enhance the long-term value of a-shares.

xu chi believes that as the market's understanding of dividend assets deepens, on the one hand, listed companies will pay more attention to shareholder returns, strengthen information disclosure, and increase dividend ratios in the future, thereby improving the return on investment in the capital market.

on the other hand, the increase in dividends of listed companies and the rising attractiveness of dividends will also cause investors' investment behavior to shift towards identifying high-quality listed companies with real investment value for long-term investment. this will help improve investors' investment behavior, reduce market volatility, and promote the transformation of the capital market from a "financing market" to an "investment market."

"increased dividends are conducive to improving the quality of listed companies, attracting long-term funds into the market, and supporting stock prices. listed companies may pay more attention to shareholder returns, and the proportion of long-term investors may increase." deng lijun said that as the understanding of dividend assets further increases, more companies may give priority to returning dividends to shareholders through stable or gradually increasing dividends, prompting listed companies to pay more attention to cash flow management and long-term profitability in their operations and management. at the same time, the investor structure may be optimized, the proportion of long-term investors will increase, and the income-oriented investment strategy with dividends as the core will be more widely promoted in the a-share market.

yang chao also said that the overall increase in the number and size of dividends paid by listed companies will not only optimize the capital market structure, but also improve the behavior of market participants:

first, it improves the maturity and stability of the market. when listed companies pay cash dividends frequently and on a large scale, it can demonstrate that the company is in good financial condition and has sufficient cash flow, which can attract more patient capital and stable investors, such as pension funds and insurance companies. such a change in investment behavior can help reduce market volatility and improve the overall stability of the market.

secondly, enhance the shareholder return awareness of listed companies. the improvement of dividend policy usually reflects the importance of listed companies to shareholders' rights and interests, which can promote more companies to adopt shareholder-friendly governance structures and operating strategies.

thirdly, dividend increases can effectively improve the liquidity of market funds. when shareholders receive cash dividends, these funds are conducive to activating the market economy and promoting the vitality of the capital market and the broader economic environment.

finally, it promotes the formation of a value investment culture. the increase and scale of dividend policies guide investors to focus on the fundamentals and long-term value of enterprises, rather than simply chasing short-term benefits brought by stock price fluctuations. this helps to form a more rational and mature investment environment, reduce unnecessary speculation, and encourage the market to pay more attention to the real growth and profitability of enterprises.