With the calendar turning to the title page of July, 2024 has officially entered the second half of the year.
Looking back on the first half of this year, the key word of the equity market is still "differentiation", but it seems more extreme.
On the one hand, the market's premium for "certainty" is rising, and the dividend style is intensifying; On the other hand, the aesthetic of "big is beautiful" continues to migrate, and the performance of the small and mid-cap style has fallen into a freezing point.
(Source: Wind, as of 2024-6-30)
However, after the high-dividend strategy has accumulated three consecutive years of excess returns compared to the Wind All A Index, in the past June, the dividend-related index recorded the largest adjustment this year.
Standing at this point in time, is the dividend style after the pullback "dead down" or "comeback"? Can this position be allocated to a dividend fund? Next, dig the base belt and take a good look ~
01
Why is the bonus style adjusted?
First, due to the need for some funds to take profits in stages.
Especially for those who do not require a long holding period and pursue absolute returns, they may be inclined to cash out part of their returns in the short term. With the advent of the A-share dividend season, the cash-out pressure faced by some stocks has risen in stages.
The second is due to the calendar effect that has always existed in the dividend sector.
Counting the monthly performance of dividend strategies since 2016, it is not difficult to find that the average excess return (-3.9%) and average win rate (13%) of the CSI Dividend Index in June were the lowest.
China Securities believes that this phenomenon is closely related to the seasonal characteristics of dividends of A-share companies, and most companies choose to concentrate cash dividends from May to July each year.
From the data analysis from 2019 to 2023, it can be seen that the average weekly excess return of CSI dividend constituents before and after the dividend date (compared with Wind All A) shows a certain pattern:
Excess returns are usually negative in the first week after a dividend payout, but from the second week onwards, the direct impact of dividends on stock prices begins to wane.
As of the end of June, a total of 2,831 A-share companies have paid dividends in their annual reports, with a total cash dividend of 935.5 billion yuan. Looking at the whole market, a total of 3,865 companies will launch distribution plans in 2023, and 3,856 will include cash dividends in their distribution plans, with a cumulative cash distribution of 1.98 trillion yuan. Combined with the dividends in last year's semi-annual report and third quarterly report, the overall dividend amount of A-shares in 2023 will exceed 2.2 trillion yuan, a record high. (Source: Wind)
As of last Friday, nearly 70% of the companies in CSI Dividend have paid dividends. Combined with the analysis of the calendar effect, it is expected that the impact of the trading level on the overall style will gradually weaken in July.
02
Can I still allocate dividend funds?
We might as well return to the timing system of dividends and answer the following questions step by step.
A look at the dividend yield – the essential appeal of an investment dividend strategy
If the key points of investing in dividend assets are condensed into one sentence, that is: now, certainty, more dividends and cash. The "dividend yield" is one of the most important "pricing systems" for dividend assets.
Dividend yield can eventually be broken down into "dividend ratio/price-earnings ratio PE", and theoretically, the essential attraction of investment dividend strategy lies in two levels: one is to earn income through corporate dividends in the long run, and the other is to use the market's staged low valuation in the short term to defend or seek repair profits.
Taking the CSI Dividend Low Volatility Index (code: H30269) as an example, the current dividend yield of the index is 6%, which is at a high level of 86.3% quantile in the past ten years.
(Source: Wind, as of 2024-6-28)
When the new "National Nine Measures" are implemented, when the regulatory thinking has changed from "building systems, non-intervention, and zero tolerance" to "strengthening supervision, preventing risks, and promoting high-quality development", and more emphasis is placed on "politics and people's nature", the high dividend and stable dividend sectors are in line with the long-term value investment orientation, and may be evolving into medium and long-term investment logic.
Second, look at Treasury yields, a more certain measure of relative returns
Since 2016, with the successive opening of Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, the influence of overseas capital in the mainland market has increased. As a result, there is a positive correlation between the 10-year Treasury yield and the excess return of low-volatility dividend assets, and this correlation has become stronger in recent years.
As an anchor for global asset pricing, high Treasury yields are not friendly to high-valuation sectors and long-term assets, especially in emerging markets. Short-duration assets, on the other hand, have a clear advantage in terms of certainty, with the short-term cash flow of dividend assets being the most certain.
In the face of stubbornly high inflation across the ocean and Treasury yields, which are still at their highest levels since 2007, at least for the time being, the adjusted dividend low-volatility assets remain attractive.
Third, look at the trading congestion - the market sentiment that cannot be ignored
The market sentiment under the stock game seems to have become an invisible force that affects the market, and investors often sigh - don't go to places with many people. However, "how many people are outnumbered" is not determined by feelings, but by precise indicators and data.
As of June 28, 2024, the trading volume of CSI Dividend is at the 50.07% quantile of the past three years, compared with the 90.25% quantile a month ago, and the transaction congestion has dropped significantly to the historical pivot level. (Source: Cinda Securities)
From this point of view, the dividend strategy in this position is not overheated, nor has it reached the moment when it needs to retreat strategically.
In the face of the reality that the fundamentals are still grinding the bottom, the back and forth of emotions and the complexity of the capital game, the allocation advantage of dividend assets at the current stage has reappeared.
03
How do you configure it now?
William O'Neill once said, "The market is always right". There is no eternal "holy grail" in investment, only the investment paradigm of "survival of the fittest".
In this round of downward cycle, in the face of short-term uncertainty, the "leftovers" who are king have chosen "antifragile", and the equity market has chosen the "barbell strategy". According to reports, a number of public fund companies continue to use a relatively balanced dumbbell strategy in the second quarter, that is, the allocation of high dividends and technology growth. (Source: China Securities Journal)
Ordinary investors may be able to use this as a reference to introduce the "barbell strategy" to establish an "anti-fragile" system in investment from the perspective of asset allocation.
Abandon the middle part of the medium-risk, medium-return assets, and allocate to the heavier two: one is high-risk and high-return, and the other is low-risk and low-return, so as to achieve a balance of returns.
The most extreme result is that most of the high-risk 10% face losses, but once they choose the right one, the upside is larger. That is, to use predictable losses to gain high elasticity to achieve the goal of medium returns, and to use asymmetry to improve the anti-fragility of investments.
The investment direction of dividend funds usually has high dividends, high ROE, low valuation, and large market capitalization, and naturally has the advantage of matching with technology growth as a barbell strategy.
At one end of the barbell strategy is the main line of the new cycle, which represents the direction of China's future industry; On the other hand, there are low-volatility dividend assets, which reduce portfolio volatility through quasi-fixed-income high-dividend assets.
Source: Guotai Junan Securities
In the ever-changing capital market, no asset can dominate and remain invincible forever. While it's hard to predict where the short-term will go, there's no shortage of "hard but right" ways to improve your long-term chances.
Adhere to the "bottom-line thinking", use the "winning rate thinking" in the barbell strategy to guide investment, and find a valuable balance between risk control and potential returns, so that you can try your best to benefit from uncertainty.
Speaking of this today, I wish you all smooth investment and financial management~
Risk Warning
The views expressed in this material are for informational purposes only and are not intended as any legal documents, and all information or opinions expressed in the materials do not constitute final operational advice on investment, legal, accounting or taxation, and we do not make any warranties for the final operational advice regarding the content of the materials. Under no circumstances shall the Company be liable to any person for any loss arising from the use of any content in this material. The above content does not constitute a recommendation of individual stocks. The past performance of the Fund and its net worth are not indicative of its future performance, and the performance of other funds managed by the Fund Manager does not constitute a guarantee of the performance of the Fund. The Manager does not guarantee profitability and does not guarantee a minimum return. Investors should fully understand the difference between regular and fixed investment of funds and savings methods such as small deposits and withdrawals. Regular investment is a simple and easy way to guide investors to make long-term investments and average investment costs. However, regular investment does not avoid the inherent risks of fund investment, does not guarantee investors to obtain returns, and is not an equivalent financial management method to replace savings. The market is risky, and you should be cautious when entering the market.