Introduction: classical value is immortal, and high dividend strategy is the shield.
Stone from another mountain: high dividend strategy is a long-term effective value investment strategy overseas. (1) The high dividend strategy is based on the classic value investment theory - dividend discount model (DDM). The principle is that the total net value of a series of dividends expected to be distributed in the future is discounted according to the interest rate, which is the internal value of the stock. In practice, investors often use the dividend rate as the judgment index. (2) From overseas experience, the high dividend strategy is a long-term effective investment strategy, which has been widely used in overseas mature markets. At present, there are many indexes based on High Dividend Strategy in overseas markets, which perform well. For example, since the establishment of the S & P high dividend noble total return index in the United States in December 1999, the annualized yield of the S & P high dividend noble total return index has been 10.8%, outperforming the S & P 500 index by 3.2 percentage points. The annual yield of Japan's MSCI high dividend index was 4.8%, outperforming the Nikkei index by 3.5 percentage points.
Historical Retrospect: the high dividend strategy is also a long-term effective investment strategy in a shares. (1) Regardless of dividend reinvestment, the portfolio of high dividend strategy outperformed the 50 and 300 indexes and was in line with the all a of China Securities. Starting from January 1, 2009, as of February 8, 2022, the annualized average rate of return of the CSI dividend index is 9.2%. (2) Since 2009, the dividend reinvestment of CSI dividend index has contributed 40.9% of the investment income. Considering the dividend reinvestment, the high dividend portfolio outperforms all a, with considerable excess return and high sharp ratio. In the past 12 years, the annualized average yield of the CSI dividend total yield index is 12.9%, which is higher than that of the whole a and the main broad-based index, but its volatility and maximum pullback are lower than the main broad-based index, the sharp ratio is 0.43, the return risk ratio is high, and the long-term investment value is prominent.
Analysis on the reasons for the excess return of A-share High Dividend Strategy: (1) market environment: when the market is volatile or bear market and risk appetite is low, the winning rate of high dividend strategy will increase. In a shares, the high dividend strategy also has the function of bear market umbrella. It is more resistant to decline in the stage of market shock or unilateral downward, highly defensive and generally offensive in the bull market. The high dividend portfolio (CSI dividend index) belongs to the classical value style and presents a seesaw state with the performance of growth style. When the market changes from pursuing growth attack to value style risk avoidance, the victory rate of high dividend strategy increases. The fundamental reason is that high dividend companies can stably distribute cash dividends, with low valuation and more stable molecular expectation, This provides a safety cushion for its asset pricing. (2) Interest rate factor: when the interest rate goes down, the high dividend strategy has a high winning rate of positive return and excess return. As a bond like asset, high dividend portfolio is highly sensitive to interest rate. In the downward cycle of overseas interest rate, high dividend portfolio obtains high excess return. In a shares, there is also a reverse relationship between the yield of high dividend portfolio and long-term interest rate. When the interest rate goes down, the high dividend portfolio has a higher probability of positive return and excess return. In the low interest environment, high dividend performance is better than the all a and major weighted indexes, but not as good as the 1000 index.
Why the high dividend strategy deserves attention: (1) in the short term, the low risk preference + long-term interest rate goes down, and the excess return of the high dividend strategy is obvious. Since late October 2021, the macroeconomic state has changed from stagflation in Pringle stage 5 to countercyclical regulation in stage 1, and the central bank's monetary policy has gradually shifted to easing, which has driven the long-term interest rate down to 2.7%. Due to the increase in the expectation of economic recession and the tightening of overseas monetary policy beyond expectation, the expectation of A-share elements is unstable, the risk appetite is reduced, and the market shock is corrected, The high dividend strategists are expected to be more stable and the downward transmission of long-term interest rates is smoother. From October 25, 2021 to February 8, 2022, the CSI dividend total return index achieved a return of 1.9%, which was - 5.6% higher than the CSI A-share total return index, and the excess return was obvious. (2) It is expected that the long-term dividend policy will slow down the growth cycle and increase the effective dividend yield at the lower end of the market, so that the long-term dividend yield will continue to increase. The population growth rate has slowed down, the economy has changed from high-speed to high-quality development, and China's interest rate has declined for a long period of time; Under the background of the implementation of the new regulations on asset management, the net worth transformation of financial products has brought long-term incremental funds; With the continuous improvement of the A-share market system and the increase of the voice of institutional investors, corporate governance has been paid attention, and the improvement of A-share dividend payout rate is also a long-term trend.
The strategy is applicable and the value shield: (1) in the short term, when the credit is extended, switch to small cap growth and specialize in new products. The bond market is playing a game to broaden the credit effect. In the short term, the long-term interest rate is expected to fluctuate at a low level. When the credit transmission increases and the interest rate rises, the high dividend strategy will no longer prevail. From the perspective of risk appetite, with the introduction and implementation of a series of steady growth combination punches, investors' risk appetite will be repaired, and the market is expected to step out of the bottom shock and usher in the bull market, while the high dividend strategy is often not aggressive in the bull market. During the credit recovery period, the position was switched from high dividend to small cap growth and specialized in special innovation. (2) In the long run, the high dividend strategy is still a value shield, suitable for the left configuration and seeking victory in stability. For classical value investors, buying at a sufficiently low valuation is the key, with a high dividend yield as the guarantee, waiting for the potential high return brought by valuation repair. If the macro-economy bottoms out and picks up, the assets with high dividend yield, together with the improvement of earnings and valuation, will form a double-click of stock price. In the recent market correction period, the valuation of some high-quality enterprises has decreased. We can pay attention to the energy, finance and real estate industries with historically low valuation and improved implied yield, and allocate them in combination with stock market value, performance stability and liquidity.
Risk tips: liquidity tightened more than expected, the epidemic worsened more than expected, and the guidance of historical backtracking is limited.
