In an environment characterized by low interest rates and supportive government policies, the spotlight has once again turned toward high-dividend sectorsParticularly, absolute return-oriented investors, especially insurance capital, are showing an increased demand for dividend asset allocationThe current state of dividend asset valuations seems relatively moderate, with trading activity also subdued, lending to a potential rise in cost-effectiveness for these assets in the near term.

Recently, market interest in dividend assets has surged, especially as we experienced increased volatility in November, resulting in growth styles reflecting weaker performanceSince December, dividend assets have consistently outperformed, with sectors such as coal, utilities, steel, and banking showcasing notable gains.

Looking forward to 2025, several institutions have identified dividends as a key market theme for the upcoming year, projecting that dividend assets will remain a primary choice for long-term capital allocation.

Given the backdrop of low interest rates, entities like Industrial Securities have recognized that China's shift towards "moderate easing" in monetary policy indicates a clear downward trend in interest rates

The current yield on 10-year government bonds has dipped below 2%, while bank wealth management products continue to see reduced returnsThis environment contributes to a scarcity of attractive investment options, enhancing the perceived cost-effectiveness of dividend assets, which currently present a dividend yield of approximately 5.1% on the CSI Dividend IndexThis stands out against a backdrop where long-term bond returns have diverged by a notable 3.5 percentage points.

Co-signing this sentiment, Huaxin Securities states that with the yield on 10-year government bonds falling below 2%, there’s a migration of deposits and a strategic repositioning by insurance capital that favors high-dividend assetsThey note the challenges of enduring high US Treasury yields alongside sluggish social financing and low inflation, culminating in a reduced advantage for growth-style investments, thus making dividends more attractive once again.

In further analysis, Guotai Junan underlines the current yield of the CSI Dividend Index at 5.26%, which is positioned at the 76.32% historical percentile

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When examining risk premiums, the difference between the CSI Dividend Index yield and the yield of 10-year government bonds stands at 3.55%, corresponding to the 93.25% historical percentile, clearly highlighting the increasing attractiveness of dividend assets relative to bonds.

Market expectations from Guosheng Securities hint at further space for rate cuts into 2025, with the yield on 10-year government bonds set to continue declining, promoting an expansion of the risk-free rate differential that favorably positions dividend assets as suitable for long-term investment.

For long-term capital, especially from insurance sectors, dividend assets emerge as significant components of portfolio allocationAs the end of the year and the beginning of the new year approaches, the demand from absolute return-oriented investors for dividend asset allocation is rising.

Industrial Securities indicates that with the persistent downturn in long-term bond yields, the relative cost-effectiveness of equities compared to bonds is improving

This stability in earnings and attractive high dividend returns are making dividend assets more appealing to insurance capitalAdditionally, at this time of year, when traditionally high insurance premiums are expected to flow in, the push for income generation further fuels the demand for dividend assets, resulting in potential significant capital influx into these sectors.

Huaxin Securities adds that as market risk appetite increases alongside already heavy insurance capital positions in stable high-dividend sectors, there's a noticeable shift toward increasing allocations among stocks that demonstrate consistent long-term profitability and strong dividend intentions, highlighting consumption sectors as colorful candidates for long-term strategies.

The acknowledgment of companies consistently offering dividends is also garnering attention

According to Huaxin Securities, by December 20, 2024, 704 companies had announced interim dividend proposals, a steep increase of 263% year-on-year, while 290 firms declared third-quarter dividends, marking a 360% riseThis emerging pattern indicates a trend toward a more systematic and frequent dividend distribution within A-shares.

Further enhancing this environment, the recent reduction in distribution fees and policy shifts regarding market capitalization management have encouraged firms towards consistent dividend payoutsSince November, an uptick in the frequency and willingness to distribute dividends has been observed among major industry players, bolstering overall shareholder returns and attracting more investor interest in dividend assets.

However, investors should remain discerning as the landscape of dividend assets evolves

Haitong International points out that, based on representative indices, the current valuation of dividend sectors sits at historical lows, with trading volumes at an average levelAlthough the trading indicators suggest a degree of lukewarm interest, specific sectors within dividends are experiencing below-average heat according to historical standardsStock-specific enthusiasm remains at moderate levels but varies significantly between sectors.

It is crucial to assess how short-term market performance reflects on dividend assets, given that the outperformance associated with dividend strategies tends to show a negative correlation with prevailing market conditionsAs market volatility has cooled off since mid-November, this correlates with a slow down in margin inflows, reflecting an overall shift toward a phased and tumultuous trading environment

Under such circumstances, the likelihood of dividend assets delivering excess returns may increase, as their current valuation metrics and trading activity are subdued, potentially enhancing their short-term cost-effectiveness.

Moreover, Huaxin Securities emphasizes that within the current backdrop of declining interest rates, ongoing macroeconomic uncertainties, and the institutionalization of dividends within listed companies, dividend-oriented assets continue to show robust fundamentals for long-term loyaltyWith an expanding market focus on high-dividend sectors, research into dividend assets is becoming more nuanced, evolving past the investment in stable sectors like banks and utilities to a broader spectrum that targets firms with stable profitability and significant dividend payouts, especially given the prevailing uptick in investor risk appetite.

Guosheng Securities recommends attention toward high-yield, undervalued banking stocks that demonstrate stable growth in earnings and sufficient risk provisions

They also highlight the importance of considering trading factors such as liquidity status and pressure points after essential share conversions.

Guotai Junan considers that industries like waste management and water services present relative valuation advantages and are poised for balance sheet recovery, offering clear configuration benefits among leading companies in the dividend sectors.

Finally, it is advocated to consider a strategic positioning towards consumption dividends and Hong Kong stock dividendsState-owned enterprises stand to gain from mergers, capital management, and supporting policiesStock options with higher yields coupled with solid fundamentals should outweigh risks and provide favorable conditions for investmentThe consumption dividend arena is now perceived to be at relatively low valuations, with previous congestions easing, suggesting an upward potential bolstered by supportive policies in consumer markets