Recently, the overall performance of the A-share market has been less than stellar; however, the dividend-style funds are still showing considerable activityThis raises the question of whether their momentum is sustainable moving forwardIn light of this, a reporter from the Securities Times reached out to several fund companies, including Huabao Fund, Invesco Great Wall Fund, Debang Fund, West China Li De Fund, and Dacheng Fund, to discuss dividend investment strategies for the year 2025.

In a market filled with financial uncertainties, the allure of dividend stocks continues to shine brightlyJust recently, multiple banks announced their dividend distributions for the 2024 semi-annual periodAccording to data from Wind, the total amount of interim dividends from the six major banks, such as the Industrial and Commercial Bank of China, Agricultural Bank of China, and Bank of China, reached a staggering 204.823 billion yuan, which accounts for over eighty percent of the disclosed interim dividends from the banking sector

Bolstered by this favorable dividend news, stocks of banks including Chengdu Bank and Shanghai Bank have continually reached new price highs.

Moreover, apart from the banking sector, dividend stocks in the public transportation sector have also garnered significant attention from investorsRecent performance has shown that stocks from companies like Shenzhen Expressway, Shandong Expressway, and Yuantong High-Speed have also hit new levelsAnalysts note that the robust profitability and solid cash flow of companies engaged in road, rail, and port operations, combined with their commitment to high dividend policies, have accentuated the value of high-dividend central enterprises in the transportation industry.

Statistics reveal that dividend funds are pivotal shareholders in significant banking and transport stocksIn the third quarter of last year, the Huatai-Pinebridge Low Volatility Dividend ETF, managed by Liu Jun and Li Qian, saw significant holdings in Bank of China

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Similarly, funds such as the China Universal Value Select A, managed by Lau Jianan, and the China Universal Dividend Growth A, leaned heavily towards investments in Agricultural Bank of ChinaFurthermore, notable products managed by professionals like Tan Li and Wang Dan from China AMC and Du Yang and Yan Yao from ICBC Credit Suisse Asset Management showed significant ownership in Chengdu Bank.

When it comes to the transportation sector, nearly a thousand billion yuan was funneled into the Huatai-Pinebridge Dividend ETF, which ranked among the top ten shareholders in several transport stocks such as Shenzhen Expressway and Shandong ExpresswayThe Invesco Great Wall CSI Dividend Low Volatility 100 ETF also reported significant holdings in Shenzhen Expressway and Fujian High-Speed.

Thanks to the impressive performances of specific dividend stocks within the transportation sector, dividend funds overall have made solid gains

Reflecting on 2024, the Huatai-Pinebridge Low Volatility Dividend ETF has registered a year-to-date return of 22.64%, while other funds such as the E Fund CSI Dividend ETF and the Fullgoal CSI Dividend Index Enhanced A have logged returns of 17.97% and 12.20% respectively.

Looking back through the lens of time, analysts indicate that the recent rise in bank stocks is primarily a continuation of a prevailing market styleAs indicated by Yang Yang, the incoming manager of the Huabao S&P Hong Kong Stock Connect Low Volatility Dividend Fund, "2024 is likely to be a strong year for banking stocks, and high dividends will be one of their defining characteristics." He argued that the undervaluation of Chinese financial assets compared to their global peers offers considerable recovery potential, making the valuation rebound for bank and other dividend stocks a significant factor for the upward trend of these assets in 2024.

The outlook for low interest rates raises optimism among investors for dividend assets

Many fund managers opine that the trajectory of interest rates, market risk appetites, and other factors will invariably impact the volatility of dividend assets in the short to medium termCai Zhiwei, who is set to manage the Rongtong CSI Chengtong Central Enterprise Dividend ETF, stated to a reporter that "dividend assets are undoubtedly a worthwhile addition to the A-share market in the coming years."

To begin, it should be noted that historical performance has proven the long-term excellence of dividend assetsBetween 2017 and 2024, the total-return index of the CSI Chengtong Central Enterprise Dividend posted an impressive return of 101.44%, an annualized return nearing 9.5%. In comparison, the annualized return of the CSI 300 Total Return index reached only 4.7%, while the CSI 500 total return hovered just above 0.3%.

Secondly, it is anticipated that the domestic market will remain in a low-interest-rate environment for some time to come

Currently, dividend assets generally offer a yield between 4% and 6%, presenting a margin of about 3% over the ten-year government bondsThis existing spread not only creates a long-term demand for dividend-type assets but also reinforces their appeal as attractive investment options.

Additionally, capital market reforms and a push for dividend policies by the government further enhance the landscape for dividend assetsWith the new "National Nine Measures" set to place more emphasis on dividend payouts and the introduction of further regulations by China’s Securities Regulatory Commission and the State-owned Assets Supervision and Administration Commission, there is an ongoing structural and policy-driven momentum supporting these assets’ investment value moving forward.

Senior researcher Zhao Wufan from Debang Fund shared similar sentiments, noting that the rapid decline of long-term interest rates has significantly improved the cost-effectiveness of dividend asset allocations, especially as the year comes to a close

Many investors now tend to favor defensive dividend holdings for the festive season, with some eager to secure dividends by acquiring stocks earlier than usual.

The cost-effectiveness of these dividend investments is expected to provide robust support for a sustained focus on dividend stylesAs the calendar turns to 2025, the continuation of dividend-focused investment strategies and which dividend assets deserve closer scrutiny remain pressing questions.

Dacheng Fund posits that dividend assets are likely to maintain their favorable trajectory into 2025 for several reasons: first, the implementation of new accounting standards by insurance funds may prompt capital inflows; second, the dividend yield for the CSI Dividend stocks remains above 5%, while the yield on ten-year treasury bonds has dropped to approximately 1.6%, driving a favorable 3.4% equity-bond spread that enhances investment attractiveness; and third, dividend stocks remain concentrated in stable industries such as banking, coal, and transportation, which are known for their resilience and defensive features against market fluctuations

However, they caution that if the market warms up and growth styles begin to dominate, dividend stocks could lag in relative performance.

Du Pengzhe, a fund manager at West China Li De, highlighted that the dividend opportunities within the consumption sector deserve particular attention moving forwardAfter three years of adjustments and industry-wide shakeouts, several consumer companies have shifted their focus from aggressive growth via rapid expansion to enhancing profitability and increasing shareholder returnsThis development has the scope to gradually recognize the investment value of certain dividend stocks within the consumption sector.

The investment research team at Invesco Great Wall noted that the swift decline in interest rates has recently renewed interest in high-dividend stylesWhile the ongoing vibrancy of small- and mid-cap styles depends on changes in funding dynamics, the long-term outlook indicates that investors should prioritize sectors with solid fundamentals combined with positive supply-demand dynamics