The Zhitong Finance App learned that Minsheng Securities released a research report saying that the banking sector's dividend ratio is relatively leading, and the allocation is more cost-effective. As of the close of January 5, 2024, the banking sector (CITIC Tier 1, same below) had a dividend ratio of 5.88%, ranking second in the CITIC Tier 1 industry. The relative premium between the dividend rate in the banking sector and the yield to maturity of 10-year treasury bonds is in a historically high position, and the margins are broadening. In the context of the overall stabilization of market risk appetite, bank stock allocations with high dividends are relatively cost-effective. Maintain the industry's “Recommended” rating.

Minsheng Securities's views are as follows:

Bank stock high dividend strategies are expected to obtain stable and better returns:

First, the cash dividend ratio in the banking sector has stabilized at a high level: the cash dividend ratio of listed banks has been stable at a high level since 2019, that is, the dividend rate ratio is relatively stable. Specifically, the cash dividend ratio of major state-owned banks has remained above 30%; in addition, China Merchants, Jiangsu, Nanjing, Qingdao, Xi'an, Suzhou, and Chongqing agricultural commercial banks have also had high cash dividend ratios in recent years.

Second, the banking sector also has undervalued attributes: Currently, as of January 5, 2024, the valuation of the banking sector has dropped to 0.53 times PB, that is, the denominator of the dividend rate is at a low level. At the same time, PB in the banking sector is currently at a low level since 2010, there is limited room for valuation compression, and the margin of safety is high.

The dividend strategy is not limited to major state-owned banks. In 2023, benefiting from factors such as the “China Special Assessment”, the high cash dividend ratio, and the increase in Central Huijin's holdings, the yield performance of major state-owned banks in 2023 was relatively good. Currently, not only major state-owned banks are stabilizing high dividends; the coverage of dividend strategies may expand. Considering that the dividend ratio of listed banks is generally stable, we might as well define a “dynamic” dividend rate = (2022 dividend* 2023 net profit growth rate) /closing price to measure the dividend rate differentiation within the banking sector in 2024.

Estimates have revealed that the dynamic dividend rates of some small and medium-sized banks have surpassed that of major state-owned banks, and the scope of dividend strategies is expected to spill over to these targets: such as Bank of Chengdu with a dynamic dividend rate of 8% or more, Bank of Jiangsu in the 7.5%-8% range, Societe Generale and Bank of Nanjing in the 7%-7.5% range, and Zhejiang, Beijing, Yunong, Huaxia, Shanghainong, Shanghai, Everbright, and China Merchants Bank in the 6.5% to 7% range.

Investment advice: The high dividend cost ratio is highlighted, and the bank layout is at the right time

In the process of economic recovery, the cost performance ratio of high dividend strategies to bring stable dividend returns is becoming more and more prominent. However, the banking sector may be a key allocation area under a high dividend strategy. First, the bank sector's dividend ratio is in a leading position in various industries; second, the banking sector's cash dividend ratio has always stabilized at a high level, and valuations are at a historically low level, with typical dividend characteristics. Maintain the industry's “Recommended” rating.

Risk warning: macroeconomic fluctuations exceeded expectations; economic recovery fell short of expectations; monetary policy shifts; measurement results may have errors with actual conditions.