Fed Cuts Rates + Dividend Wave Hits

After more than four years, the United States has finally seen its first interest rate cut.

On September 18th local time, the Federal Reserve announced a rate cut of 50 basis points, marking the first cut since March 2020.

This rate cut is expected to usher in a global easing cycle.

Which type of asset is likely to benefit more under the rate cut cycle?

The industry generally believes that the short-term impact of the Fed's rate cut may be positive for growth industries, but the fundamental investment logic for dividend-paying assets has not changed in the medium to long term.

After a short-term correction, the cost-performance ratio of dividend-paying assets has returned, and dividend funds are still worth long-term investment.

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As external liquidity improves, domestic regulatory authorities are also continuously improving the incentive and restraint mechanisms for listed companies' dividends, encouraging listed companies to enhance investment value and increase returns to investors.

The new "Nine National Policies" also explicitly propose to "enhance the stability, continuity, and predictability of dividends, and promote multiple dividends within a year, pre-dividend, and dividends before the Spring Festival."

Now, multiple dividends within a year have become a new trend for listed companies.

According to the data from the China Securities Regulatory Commission, in the first eight months of this year, 663 listed companies implemented or announced mid-term profit distribution (including the first-quarter and half-year reports), totaling 533.7 billion yuan, an increase of 290% and 157.1% year-on-year, respectively, with 248 companies expected to distribute more than 100 million yuan in mid-term dividends.

Although dividend-paying assets have recently undergone adjustments, the demand for dividend-paying assets remains in the long term.

Huaxi Securities believes that on the one hand, the new "Nine National Policies" continue to guide the dividends of listed companies.

On the other hand, the expectation of loose monetary policy continues to ferment, and it is difficult to change the low-interest-rate environment in the short term, making dividend-paying assets more cost-effective.

In response to the Fed's rate cut, Orient Securities stated that under the background of the decline in the expected return rate and broad interest rates, the dividend strategy may still be attractive.

The dividend strategy uses the dividend yield or dividend yield growth rate as the benchmark for stock selection, so the basket of stocks selected by this strategy has an investment logic similar to long-term bonds.

In the context of a long-term downward trend in interest rates, some enterprises (including investment institutions) with longer debt durations will continue to look for long-duration high-yield assets.

Zheshang Securities also believes that dividend-paying assets have certain similarities with bonds, and the configuration-driven investors "herding" drive the rise of dividend-paying assets, while short-term trading factors cause transactional investors to leave, creating short-term shocks.

However, the underlying logic of dividend-paying assets driven by configuration demand has not changed significantly, but one should be wary of transaction risks such as high prices.

The team also believes that dividend-paying assets may show certain similarities with the government bond market, showing a "sharp fall and slow rise" characteristic.

Wang Ning, Chief Investment Officer of Changsheng Fund and manager of Changsheng Quantitative Dividend Fund, once again emphasized long-term and patience in the fund's semi-annual report.

He pointed out that since the financial reforms that began in October 2023 have been continuously deepening, and after the Spring Festival in 2024, the domestic stock market reforms have also gradually deepened.

The comprehensive reforms from the issuance to the delisting of stocks have made the long-term patient capital advocated by the market gradually become a clear reality.

The management encourages listed companies to increase the intensity and frequency of dividends, increase the dividend payout ratio, increase the intensity of buybacks and buyback cancellations, and the industry chain integration within related industries.

The dividend factor, due to its natural value bond-like attributes, will continue to become one of the hot and focal points of patient capital due to the above measures.

On the other hand, as a "long-distance fund" with a base age of more than ten years, Changsheng Quantitative Dividend has benefited from the forward layout of dividend assets and the implementation of the "expected dividend + expected profit" strategy, also bringing a good return to patient investors.

According to the statistics of Galaxy Securities, as of August 30, 2024, the net value growth rate of Changsheng Quantitative Dividend A in the past year was 9.02%, ranking in the top 1% (17/1670) of comparable equity-type funds; since its establishment in November 2009, the cumulative net value growth rate has been 402.20%, with an annual geometric average yield of 11.54%.