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Can the dividend strategy be continued?The latest views of fund managers from Wells Fargo Fund’s Value Group

Can the dividend strategy be continued?The latest views of fund managers from Wells Fargo Fund’s Value Group


In volatile markets in the past, dividend strategies have been favored by many investors due to their high dividend properties. Although some people questioned the sustainability of the dividend strategy half a year ago, it has still managed to make it this far. In response to this phenomenon, many fund managers from the Value Group under Wells Fargo Fund have expressed their opinions. Let’s take a look.

Taking the Dividend Representative Index Dividend Index and CSI Dividend as an example, as of February 29, the indexes had risen by 7.68% and 5.29% respectively in the past six months, while the Shanghai Composite Index was -2.69% during the same period. Extending the timeline a little further, in the past year, the dividend index has had positive yields, rising 7.63% and 3.66% respectively, while the Shanghai Composite Index has fallen even more, at -7.45%.

In a weak market environment, the dividend strategy has indeed proved quite resilient. More importantly, the dividend income provided by the high dividend rate has solidified the safety base for investment. Therefore, the “shock-proof” ability demonstrated by the dividend strategy in the past year has caused investors to maintain great enthusiasm and attention for it.

What exactly are we talking about when we talk about dividends?

The dividend strategy also has a unique name – Dogs of the Dow. As early as 1991, Michael O’Higgins, an American fund manager, proposed this concept in the book “Beating the Dow”. What specific strategy is it? At the beginning of each year, the 10 stocks with the highest dividend yields in the past year are selected from the Dow Jones Industrial Index to form a portfolio. This simple strategy has outperformed the Dow Jones Industrial Average for many years. Therefore, the dividend strategy has become “popular” from overseas to China.

Through the interpretation of its origin, the guest officer must have also discovered its core element, dividend rate. The biggest feature of this type of asset is high dividends. The representative index of domestic dividends, the CSI Dividend Index “selects 100 listed company securities from the Shanghai and Shenzhen markets with high cash dividend yields, relatively stable dividends, and a certain scale and liquidity as index samples”; the Shanghai Stock Exchange Dividend Index is “Select 50 securities listed on the Shanghai Stock Exchange with high cash dividend rates, relatively stable dividends, and a certain scale and liquidity as index samples.”

Therefore, when we discuss dividends, we mainly refer to securities assets with high dividends and stable dividends.

Where can we find such assets?

The witty guest officer will definitely be able to answer questions in seconds, such as coal, finance, etc.

This is where high-dividend securities are mainly distributed, but upon closer inspection, they are quite widely distributed.

Let’s take a look at the full picture of the representative dividend index from its industry distribution.

Industry distribution of CSI dividend components

Note: Data comes from Wind as of February 29, 2024.

Industry distribution of dividend index components

Note: Data comes from Wind as of February 29, 2024.

◆In the CSI Dividend Index, the top three weighted industries account for 50.74% in total, including banking, coal, transportation, steel, basic chemicals, media, real estate, building materials, etc.

◆The industry distribution of the dividend index is more concentrated. The top three weighted industries account for more than 65%, mainly concentrated in coal, banking, and transportation, and coal accounts for more than 24%. In addition, it also includes steel, media, textiles and apparel, etc.

The samples of the two major dividend indexes are different, so the industry distribution is slightly different, but the distribution of key industries is still the same. What is still somewhat inconsistent with our common sense is that high-dividend assets can be found not only in coal and banks, but also in transportation, real estate, construction, steel, petroleum and petrochemical industries.

After understanding who the “dividend” is, we also need to understand, how is it developing now?

Fund products related to “dividend strategy” mainly include three major categories, passive dividend funds, active equity dividend funds, and quantitative dividend funds. Since 2023, dividend assets have attracted much attention, and the scale of related products has shown a snowball-like development. Wind data shows that as of February 28, 2024, the total scale of dividend-related assets exceeded 145 billion yuan. Excluding dividend-related monetary funds, the total scale was also as high as 114.5 billion yuan. Among them, the scale of passive dividend products alone has increased from 29 billion yuan at the end of the second quarter of 2023 to 62.9 billion yuan, an increase of more than 117%; the total number of active equity dividend funds (including flexible allocation types, partial stock hybrid types, and ordinary stock types) The scale exceeds 36.3 billion yuan.

Note: Data source is Wind, as of February 28, 2024

Among fund products with dividend strategies, passive dividend funds are mainly ETFs that closely track relevant dividend indexes, including CSI Dividend Index, Dividend Index, and Shenzhen Stock Exchange Dividend Index. Quantitative dividend funds include dividend-related index enhanced products, such as the Wells Fargo CSI Dividend Index Enhanced (Class A code: 100032) under Wells Fargo Fund. Active equity dividend funds mainly refer to investments that mainly focus on securities with high dividend and high dividend characteristics, such as Wells Fargo Dividend (Class A code: 012578), Wells Fargo Tiancheng Dividend (Fund Code: 100029), and also include QDII class The fund focuses on high-dividend assets in Hong Kong stocks, such as Wells Fargo Dividend Select QDII (RMB share: 009108).

Can the dividend strategy continue?

In the context of the growing number and scale of bonus strategy products, back to our most concerned question, can the bonus strategy be sustainable? Maybe the customer will think that the dividend strategy will only be effective in a bear market. The rich second has to say that this is another misunderstanding. Judging from the shock to the market over the past year, the dividend strategy has indeed been very effective. But it is not just a single bear market defensive strategy. In bull markets and volatile markets, the dividend strategy may also outperform the market, mainly because:

On the one hand, when dividend performance is often a period when growth stocks are in the spotlight, the rapid rise of growth stocks suppresses the room for dividend strategies to a certain extent, but this does not mean that there is a problem with the fundamentals of dividend-related securities themselves, so in the long run, it is not Affects the long-term and stable investment value of dividends. With the increase in residents’ wealth, the demand for stable allocation is increasing; on the other hand, the risk-free return of the whole society is declining, and the relative attractiveness of dividend assets is also increasing.

Since the beginning of this year, a series of policies have been introduced, such as “the effectiveness of market value management has been included in the assessment of the heads of central enterprises, the central bank has announced reductions in reserve requirements and targeted interest rates, and has emphasized strong support for real estate,” etc., which has also led to a wave of dividend value market, 2 Since February 6, as of February 29, the CSI Dividend Index has increased by 6.81%, and its performance is still very stable.

And more importantly, are bonuses more expensive now? No, the price-to-earnings ratios of CSI Dividend and Dividend Index are 6.64 times and 6.15 times respectively, and the dividend rates are 5.43% and 5.83% respectively. A dividend rate exceeding 5% is still highly attractive. Recently, the 30-year yield has broken through 2.5%, and the dividend rate of the dividend index is expected to exceed the income level of medium and long-term pure bond products. Therefore, based on the current situation, as investors’ demand for steady investment increases, the asset attributes of dividend strategies with high dividends are still highly attractive. (Data source: Wind, as of February 28, 2024)

Can the dividend strategy be continued? What do the fund managers of Wells Fargo Fund’s Value Group think?

Sun Bin: In the long run, the revaluation of assets in the dividend sector has only begun.

Sun Bin, manager of Wells Fargo Dividend Fund, believes that in the long term, the revaluation of assets in the dividend sector has just begun; in the short term, there is a certain differentiation; specifically, the focus is on hydropower and nuclear power among public utilities. After a period of adjustment in the media sector, now You can start paying attention to the stage.

Liu Lili: It is very important to identify truly high dividends

Liu Lili, the fund manager of Wells Fargo Research Select (Class A code: 000880), believes that in recognition of the investment value of dividend assets, there is one very important thing worthy of attention for dividend assets, that is, “distinguishing what is a real high dividend”. This is It is required that the judgment of the company’s fundamentals cannot be wrong. For example, for individual stocks in sectors with particularly volatile performance, the apparent attractiveness of high dividends may not be so obvious.

Pu Shilin: Compared with the level of dividend rate, the stability of dividend rate is more important

Pu Shilin, fund manager of Fuguo Urban Development (Fund Code: 000471), believes that from a medium-term perspective, focus on investment opportunities with high dividends. On the one hand, in the context of high-quality development of the Chinese economy, capital expenditures in some industries have decreased, including coal, trade and retail, etc. However, the dividend rates of these industries are still very high and dividends continue to increase. The core logic behind this is that after the reduction of capital expenditures, internal The dividend-paying ability of students is improving. Dividends are also encouraged on the policy side, and dividend rates and dividend rates in more industries are expected to increase in the future. On the other hand, a very core point is the decline of risk-free interest rates. In the process of stock selection, you cannot simply base your investment judgment on the level of dividend rate. Instead, you should look for companies that can sustain and pay stable dividends from the bottom up. You should pay more attention to the stability of the dividend rate than the level of dividend rate.

In addition to the fund managers of the Value Group under Wells Fargo Fund, Lin Qing, the representative of the two outstanding fund managers, is also concerned about dividend assets.

Lin Qing: Dividend assets are an effective and pragmatic option

Lin Qing, fund manager of Wells Fargo Tianheng (Class A code: 011830), believes that from a certain perspective, dividend assets are a very effective and pragmatic choice for the market. Under the background of high-quality economic development, the dividend-paying ability of central state-owned enterprises has improved, so dividend assets are an effective choice.



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