A Market of Extreme Divergence Alongside Low Yields
Since the start of the year, China's A-share market has traded along sharply divergent lines. AI and technology names have advanced strongly — the STAR 50 Index rose more than 50% at one point during the year — while traditional dividend assets have paused to consolidate. Volatility has also picked up across global assets, from US technology stocks to spot gold, with both high-beta and traditional safe-haven instruments swinging sharply.
At the same time, the yield on 10-year Chinese government bonds has fallen to around 1.7%, and fixed-income bank wealth-management products have returned less than 1.4% on average over the past year, extending the "asset shortage." With high volatility and low yields now overlapping, expectations for a re-rating of dividend assets are building, and quantitative dividend strategies are moving from a niche allocation toward the mainstream — a tool for dampening portfolio volatility and anchoring diversified allocation.
Dividend Assets as Steady Portfolio Ballast
Dividend assets refer principally to mature listed companies with steady earnings, ample cash flow, and both the willingness and the capacity to pay dividends — in short, high-dividend-yield stocks. From an investment standpoint, their returns derive from a stable, recurring cash dividend combined with the capital appreciation that accompanies growth in intrinsic value. This gives dividend assets a dual character — bond-like defensiveness alongside equity upside — allowing them to serve as high-quality portfolio ballast while offering a comparatively wide margin of safety.
High-quality dividend assets typically share three traits: robust profitability, high dividend quality, and undemanding valuations. By way of illustration, a leading A-share energy company shows a return on equity (ROE) roughly 1.4x the average of CSI 800 constituents; since listing, its average payout ratio has exceeded 60%, and its historical average dividend yield was sustained for extended periods in the 5–7% range — more than five times the median of the CSI 800 — while its price-to-earnings multiple is only about one-third of the market average.
On a time-series basis, following the recent market correction, valuations of dividend assets have fallen back to levels that offer attractive allocation value. According to iFinD data, the CSI Dividend Low Volatility Index currently trades at a price-to-book ratio of about 0.79 — around the 43rd percentile of the past decade — while the CSI SH-HK-SZ Dividend Low Volatility Index sits at the 50th percentile of the past ten years.
Dividends Are Not All "Old Economy": Diverse Opportunities Across Greater China
The market often treats dividend assets as shorthand for the "old economy," but in reality the two are not in conflict. The essence of a dividend asset lies in a mature business model and abundant cash flow, not in belonging to any particular sector — so the investable universe is far wider than commonly assumed. White-goods makers, advanced manufacturers, and even some leading baijiu (Chinese spirits) producers are now raising payout ratios, and high-quality companies across consumption and manufacturing are steadily expanding the pool of investable dividend assets.
Across Greater China, dividend assets in the A-share, Hong Kong, and Taiwan markets each have distinct characteristics and offer complementary opportunities. A-shares are led by traditional high-yield sectors such as financials, energy, and utilities. Hong Kong, where a liquidity discount applies, offers not only more attractive dividend yields but also exposure to leaders in technology, the internet, and consumption — broadening the sector reach of dividend assets. Taiwan, in turn, has produced a cohort of companies with stable payouts within competitive industries such as semiconductors; with relatively low correlation to the A-share and Hong Kong markets, it offers natural diversification value for cross-market, cross-sector allocation.
Over a longer horizon, dividends may well prove to be the "future" of today's growth stocks. Banking and energy were once high-growth industries themselves; today's technology leaders, once their competitive moats are entrenched and earnings growth stabilises, could likewise mature into high-dividend names. At a time of an increasingly complex global macro-outlook and intensifying technological disruption, mature assets that face a lower risk of having their industry structures upended are becoming a scarce form of quality asset.
A Broad Runway for Quantitative Dividend Strategies
Low-to-medium-frequency Quantamental investing — combining fundamental and quantitative analysis — provides an analytical framework closely aligned with the characteristics of dividend assets. Dividend assets are predominantly large- and mid-cap blue chips with ample liquidity and broad strategy capacity; more importantly, their fundamentals evolve relatively gradually and are highly verifiable, which fits well with the rebalancing cadence and fundamental-factor research of lower-frequency quant, materially enhancing the consistency and stability of excess returns. At the same time, quantitative dividend strategies are stable in style and distinctly defensive: their factor construction leans toward fundamentals, favouring companies with healthy financials, stable cash flow, and a track record of rewarding shareholders — companies that typically carry lower valuations and greater downside resilience.
The long-term runway for quantitative dividend strategies is broad, underpinned by a convergence of policy, asset, and capital tailwinds. On policy: on the mainland, the new "Nine-Point Guidelines" strengthen dividend requirements; Hong Kong benefits from mature governance codes and disclosure standards; and Taiwan is supported by sound dividend-policy guidance and a stable distribution culture. The dividend-friendly regimes across all three markets reinforce the foundations of dividend assets. On assets: as the economy enters a phase of high-quality development, the number of companies with stable cash flow continues to rise, the investable pool of dividend assets keeps expanding, and its sector distribution grows more diverse. On capital: against a backdrop of low rates and "asset shortage," long-term investors such as insurers and pension funds have a growing need to allocate to high-dividend assets, providing structural support for dividend valuations.
Against this backdrop, First Plus Asset Management is developing a quantitative dividend strategy, using a low-to-medium-frequency Quantamental framework to capture the value of dividend assets and to help investors build more resilient portfolios over the long term.