Key points of investment

I. Looking at high-dividend investment returns from the Global High Dividend Index

1.1. What are the returns of the Global High Dividend Index?

In terms of absolute returns, high dividend indices have yielded good returns in the long run. In terms of the past 20 years and 10 years, the annualized returns of the Nikkei 225 High Dividend 50 Full Income Index were 8.6% and 10.5%, respectively, and the annualized returns of the Stoke EU Select Dividend 30 Net Return Index were 3.6% and 3.1%, respectively. In the last ten years, the Hang Seng High Dividend Ratio Full Yield Index has an annualized return of 5.4%.

In terms of relative performance, 1) High Dividend Indices in Japan and Hong Kong, China performed better than market representative indices in both the short and long term. 2) The Eurozone's high dividend index is not as representative as the market index in both the long and short term.

1.2. How stable is the high dividend index?

High dividend indices have strong stability in the general environment of market decline. Looking back over the past 20 years, the high dividend indices in Japan, the Eurozone, and Hong Kong, China were able to obtain excess returns compared to market-representative indices in the context of an overall decline in the market.

1.3. What is the return composition of a high dividend index?

Japan: In the last 20 years, the price and dividend contributions to the 8.6% compound return of the Japan High Dividend Index were 5.0% and 3.4%, respectively. However, in the short term, Japan's high dividend index gradually strengthened, driven by prices.

Eurozone: The return of the Eurozone High Dividend Index is mainly composed of dividend returns. In both the short and long term, the dividend return is higher than the price return.

Hong Kong, China: Dividend returns are a major factor in the return of the Hong Kong High Dividend Index. In both the short and long term, the dividend return of the Hang Seng High Dividend Ratio Index is much higher than the price return. In particular, in the last ten years, the dividend return of the Hang Seng High Dividend Ratio Index was 6.7%, overcoming the drag on price returns and driving the index's compound return to 5.4%.

II. Dividend Rates and Valuation of Global High Dividend Indices

2.1. At what level are the current dividend indices dividend rates in Japan, Europe, and Hong Kong, China?

Currently, the high dividend index dividend ratio in the Hong Kong market, China - TTM is higher than that of the Japanese and European markets.

Although the high-dividend index dividend ratio of Japan, Europe, and Hong Kong, China varies in the range of fluctuations between the dividend ratio-TTM and the risk-free yield, the difference between Hong Kong's dividend rate-TTM and the 10-year Chinese treasury bond yield is currently at an all-time high.

2.2. What is the valuation level of the Global High Dividend Index?

The current valuation of Hong Kong's high dividend index is lower than that of the Eurozone. As of April 24, 2024, the price-earnings ratios of the Stoke EU Selected Dividend 30 Net Return Index and the Hang Seng China High Dividend Full Income Index were 8.6 times and 5.5 times, respectively.

III. Distribution and comparison of high-dividend index industries in Japan, Europe and Hong Kong, China

3.1. What is the distribution of the global high-dividend index constituent industries?

Overall, the world's high dividend stocks are mainly concentrated in the financial industry, raw materials industry, and industry, but the distribution of high dividend stocks in each market has its own characteristics. 1) The China-Africa consumer goods industry and the information technology industry, which have high dividend stocks, also account for a large share; 2) The concentration of components of the Eurozone High Dividend Index is quite divided, with many targets belonging to the non-everyday consumer goods industry; 3) Most of the targets in Hong Kong, China belong to the industrial and communication services sector.

3.2. Comparison of the investment value of high dividend targets in various industries by market

Communications services: Regardless of the dividend growth rate per share, the sustainability of dividend growth rate, or dividend rate, the investment value of high-dividend stocks in the communications services industry in Hong Kong, China, led by the “three major operators”, is far ahead.

Finance industry: 1) Banking sector: The banking sector in the Eurozone has a clear advantage in dividend growth. The high-dividend target in Hong Kong, China's banking sector has a higher dividend rate for the past 12 months than the target in the Eurozone and Japanese markets. 2) Insurance sector: High dividend targets in Hong Kong, China have a more significant advantage in terms of dividend growth and dividend rate.

Real estate industry: The dividend growth rate of the real estate sector in the Eurozone and Hong Kong, China, is in a declining channel for high-dividend targets.

Utilities: Whether in terms of dividend growth or dividend ratio, Hong Kong's utilities target are more significant.

Energy industry: The energy sector in the Eurozone and Hong Kong, China has a high compound annual growth rate of dividend per share and higher dividend rates.

Raw materials industry: The raw materials industry in Japan and the Eurozone has a high dividend target dividend growth rate.

Industry: The Japanese standard has the highest dividend growth rate, and the Hong Kong standard has a higher dividend rate.

Non-daily consumer goods industry: The dividend growth rate is high in the Japanese market in the past ten years; in the Eurozone, dividend growth is faster in the past five years, and the dividend rate is higher in the past 12 months.

Daily consumer goods industry: The dividend growth rate and dividend growth continuity of Japan's high dividend targets are relatively good.

Healthcare industry: Whether looking at the long term or medium to long term, the dividend growth rate of Japan's healthcare industry with high dividend targets is in a downward channel, and its dividend growth continues to be average.

Information technology industry: The high-dividend target of electronic equipment and components in Japan's information technology industry has had a high compound annual dividend rate of dividends per share in the past ten years, and its dividend growth has continued well.

Risk warning: Great power game risks; US policy tightening exceeds expectations; global economic downturn exceeds expectations.

Report text

I. Looking at high-dividend investment returns from the Global High Dividend Index

1.1. What are the returns of the Global High Dividend Index?

Comparing the returns of the global high dividend index and the corresponding market representative index, looking back at the absolute returns of the global high dividend index in the past, the high dividend index has performed well in the long run. For example, in the last 20 years and 10 years, the annualized returns of the Nikkei 225 High Dividend 50 Full Income Index were 8.6% and 10.5%, respectively, while the Stoke EU Select Dividend 30 Net Return Index had annualized returns of 3.6% and 3.1%, respectively. In the last ten years, the Hang Seng High Dividend Ratio Full Yield Index had an annualized return of 5.4%.

Comparing the relative performance of the global high dividend index and the corresponding market representative index, the high dividend indices in Japan and Hong Kong, China performed better than the market representative index in both the short and long term. For example, Japan's Nikkei 225 High Dividend 50 Full Income Index outperformed the Nikkei 225 Full Income Index by 2.7 pct, 2.6 pct, 6.3 pct, and 16.2 pct in terms of annualized returns in terms of annualized returns. The Hang Seng High Dividend Yield Index of Hong Kong outperformed the Hang Seng Total Income Index by 4.7 pct, 6.1 pct, and 4.9 pct, respectively, in terms of annualized returns in the past ten years, five years and one year. The Eurozone's high dividend index is not as representative of the market in both the long and short term dimensions. In terms of the past 20 years, the past 10 years, the past 5 years, and the past year, the Stoxx EU Selected Dividend 30 Net Return Index outperformed the European Stoxx 600 Net Return Index by 2.4 pct, 1.1 pct, 3.3 pct, and 1.4 pct, respectively.

1.2. How stable is the high dividend index?

High dividend indices have strong stability in the general environment of market decline. Looking back over the past 20 years, the high dividend indices in Japan, the Eurozone, and Hong Kong, China were able to obtain excess returns compared to market-representative indices in the context of an overall decline in the market.

The Japanese and European markets declined for 7 years between 2004 and 2023, while Japan's High Dividend Index and Eurozone High Dividend Index had excess returns over 5 years compared to market representative indices in the background of market decline.

The Hong Kong market declined for 7 years between 2008 and 2023. Among them, the Hang Seng High Dividend Ratio Index had an excess return compared to the Hang Seng Index for 6 years.

1.3. What is the return composition of a high dividend index?

Japan: In the last 20 years, the price and dividend contributions to the 8.6% compound return of the Japan High Dividend Index were 5.0% and 3.4%, respectively. In the short term, the price drive in Japan's high dividend index gradually strengthened. In the past year, the return from dividends was 3.8% of the 34.9% compound return of the Nikkei 225 High Dividend Index, while the price contribution rose to 30%.

Eurozone: The return of the Eurozone High Dividend Index is mainly composed of dividend returns. In both the short and long term, the dividend return is higher than the price return.

Hong Kong, China: Dividend returns are a major factor in the return of the Hong Kong High Dividend Index. In both the short and long term, the dividend return of the Hang Seng High Dividend Ratio Index is much higher than the price return. In particular, in the last ten years, the dividend return of the Hang Seng High Dividend Ratio Index was 6.7%, overcoming the drag on price returns and driving the index's compound return to 5.4%.

II. Dividend Rates and Valuation of Global High Dividend Indices

2.1. At what level are the current dividend indices dividend rates in Japan, Europe, and Hong Kong, China?

The current high dividend index dividend ratio in the Hong Kong market, China - TTM is higher than the Japanese and European markets. As of April 24, 2024, the Hang Seng High Dividend Ratio Full Income Index dividend ratio - TTM was 7.3%, and the Eurozone Stoxx EU Select Dividend 30 Net Return Index was 7.0%; as of December 31, 2023, the Nikkei 225 High Dividend 50 Index had a dividend ratio of 2.52%.

Although the high-dividend index dividend ratio of Japan, the Eurozone, and Hong Kong, China fluctuates in the range of fluctuations between the dividend ratio TTM and the risk-free return margin, Hong Kong, China is currently at an all-time high.

Comparing the fluctuation range of the dividend rate-TTM versus risk-free yield difference between Japan, Europe, and Hong Kong, China, the fluctuation ranges [1] of the Eurozone, Japan, and Hong Kong, China are between 4.8%-6.7%, -0.3%-3.8%, and 0.5%-3.9%.

As of April 24, 2024, the dividend ratio of the Stoke EU Select Dividend 30 Net Return Index - TTM was 4.4% compared to the 10-year Eurozone bond yield, deviating downward from the median -1 times standard deviation since November 2016. The dividend ratio of the Hang Seng High Dividend Ratio Index - TTM is 5.06% compared to the 10-year Chinese Treasury Bond yield, an upward deviation from the median +1 times standard deviation since December 2012. As of the end of the fourth quarter of 2023, the Nikkei 225 High Dividend 50 Index dividend rate-TTM interest rate difference was 1.73% compared to the 10-year Japanese treasury bond interest rate, which is between the median and +1 times standard deviation since the first quarter of 2000.

2.2. What is the valuation level of the Global High Dividend Index? Currently, the Hong Kong High Dividend Index is valued below that of the Eurozone. As of April 24, 2024, the price-earnings ratios of the Stoke EU Selected Dividend 30 Net Return Index and the Hang Seng China High Dividend Full Income Index were 8.6 times and 5.5 times, respectively.

III. Distribution and comparison of high-dividend index industries in Japan, Europe and Hong Kong, China

3.1. What is the distribution of the global high-dividend index constituent industries?

They are represented by the Nikkei 225 High Dividend 50 Index, the Stoke EU Selected Dividend 30 Index, and the Hang Seng High Dividend Ratio Index. Judging from the industry distribution of the high dividend index constituent stocks mentioned above, the global high dividend stocks are mainly concentrated in finance, raw materials, and industry, but the distribution of high dividend stocks in each market has its own characteristics.

Among the constituent stocks of the Japanese High Dividend Index, the financial sector, raw materials industry, and industry account for 29%, 21%, and 21%, respectively. Furthermore, Japan's high-dividend consumer goods industry and the information technology industry also account for a large share of the target volume, accounting for 8% and 8%, respectively.

The concentration of constituent stocks in the Eurozone High Dividend Index is quite divided. Among them, the financial sector accounts for the largest share, reaching 37%, followed by the raw materials industry, utilities, and non-daily consumer goods, which account for 17%, 10%, and 10%, respectively.

Among the high dividend targets in Hong Kong, China, there are many financial and industrial companies, accounting for 30% and 14%, respectively. Furthermore, among the high dividend targets in Hong Kong, China, there are also many targets in raw materials, utilities, energy, and communication services, all accounting for 10%.

3.2. Comparison of the investment value of high dividend targets in various industries by market

Communications services: Regardless of the dividend growth rate per share, the sustainability of dividend growth rate, or dividend rate, the investment value of high-dividend stocks in the communications services industry in Hong Kong, China, led by the “three major operators”, is far ahead.

1) From the perspective of dividend growth, the average annual compound growth rate of dividends per share in the past 10 years in Hong Kong, China has been between 4 and 7 years. The average compound annual growth rate of dividends per share in the past 10 and 5 years has exceeded 4%, which is significantly superior to the Japanese and European markets. 2) In terms of dividend rates, as of April 23, 2024, Hong Kong, China's median dividend rate for the past 12 months was 6.7%, which is higher than the Japanese and European markets.

Financial sector: Among the high-dividend stocks in the financial sector in Japan, Europe, and Hong Kong, China, there are many targets in the banking sector and insurance sector.

Banking sector: The banking sector in the Eurozone has a clear advantage in dividend growth. The high dividend target in Hong Kong, China's banking sector has a higher dividend rate in the past 12 months than the target in the Eurozone and Japanese markets.

1) From the perspective of dividend growth, the compound annual growth rate of dividends per share in the Eurozone banking sector in the past ten years and the past five years is significantly higher than that of Japan and Hong Kong, China. The compound annual dividend growth rate of French banking companies in the Eurozone market has even reached more than 9% over the past ten years. 2) From a dividend ratio perspective, as of April 23, 2024, the median dividend rates for high-dividend stocks in the banking sector in Hong Kong, China and the Eurozone reached 7.7% and 7.3% respectively in the past 12 months, which is significantly higher than Japan's 2.8%.

Insurance sector: High dividend targets in Hong Kong, China have more significant advantages in terms of dividend growth and dividend rate.

1) From the perspective of dividend growth, the compound annual dividend growth rate of insurance in Hong Kong, China in the past ten years and the number of years of continuous dividend growth in the past ten years has surpassed the Japanese and European markets. 2) Furthermore, from the perspective of dividend ratio-TTM, as of April 23, 2024, the dividend rate of insurance high-dividend targets in Hong Kong, China was also higher than in the Japanese and European markets.

Real estate: There are no real estate constituents in Japan's high dividend index. The high dividend targets of the real estate industry in the Eurozone are all real estate REITs. From the perspective of dividend growth in the past ten years, the dividend per share of the high dividend target in the Eurozone has had negative growth in the past ten years, and the number of years of continuous growth in dividends per share has not been high in the past ten years. There are many companies in the real estate industry in the high dividend index in Hong Kong. However, from the perspective of the compound annual growth of dividends per share in the past five years, the dividend growth rate of most companies is in a downward channel.

Utilities: Whether in terms of dividend growth or dividend rates, Hong Kong's utilities have a significant advantage over Eurozone targets.

1) From the perspective of dividend growth, the average compound annual dividend growth rate of dividends per share in Hong Kong, China has been 2.7% for the past ten years, which is higher than 1.6% in the Eurozone. 2) In terms of the continuity of dividend growth, the underlying dividend per share in Hong Kong, China has been growing continuously for 4 to 9 years in the past ten years, which is higher than in the Eurozone. 3) From a dividend rate perspective, the dividend rate of high-dividend utility stocks in Hong Kong, China surpassed the Eurozone in the past 12 months, and in breakdown, the dividend rate of the high-dividend target in the water utilities sector in the past 12 months was above 8%.

Energy industry: The energy sector in the Eurozone and Hong Kong, China has a high compound annual growth rate of dividend per share and higher dividend rates.

1) From the perspective of dividend growth, the energy sector in the Eurozone led the compound annual dividend growth rate per share in the past ten years, reaching an average of 17.8%; the energy sector in Hong Kong, China, with a compound annual dividend growth rate of nearly 13% in the past five years. 2) In terms of dividend rates, the underlying dividend rates in the Eurozone and Hong Kong, China are higher. As of April 23, 2024, high-dividend stocks in the energy sector in the Eurozone all had dividends of more than 8% in the past 12 months, and half of the target Chinese Super League companies in Hong Kong, China had dividends of more than 7% in the past 12 months.

Raw materials industry: Value stock dividends in the raw materials industry in Japan and the Eurozone are growing at a high rate.

1) In terms of dividend growth, Japan's average compound annual dividend growth rate of 7.2% in the past ten years is 7.2%, which has a clear advantage over the Eurozone's 4.4% and Hong Kong's -2.8%; the Eurozone's average compound annual dividend growth rate for the past five years has reached 10.6%, which is higher than the growth rate of the Japanese and Hong Kong markets. 2) In terms of dividend rates, as of April 23, 2024, the Eurozone's average dividend rate for the past 12 months was 6.4%, higher than Japan's 3.7% and Hong Kong's 4.5%.

Industry: The Japanese standard has the highest dividend growth rate, and the Hong Kong standard has a higher dividend rate.

1) Measured from the perspective of dividend growth, the average compound annual dividend growth rate of Japanese industrial high-dividend stocks in the past ten years and the past five years reached 16.5% and 33.9%, respectively, far higher than the Eurozone and Hong Kong, China. Furthermore, in terms of the continuity of dividend growth, the target dividend per share for the past 10 years in Japan and Hong Kong, China has been between 2-7 years and 1-9 years respectively, mostly higher than the Eurozone target. 2) In terms of dividend rates, as of April 23, 2024, Hong Kong, China's median dividend rate for the past 12 months was 6.3%, higher than the Eurozone's 5.2% and Japan's 3.4%.

Non-daily consumer goods industry: The dividend growth rate is high in the Japanese market in the past ten years; in the Eurozone, dividend growth is faster in the past five years, and the dividend rate is higher in the past 12 months.

1) In terms of dividend growth, the average compound annual growth rate of dividends per share in the past ten years, when Japan's non-daily consumer goods sector has a high dividend target, is nearly 14%, higher than 9.3% in the Eurozone. Furthermore, Japan's shares also have a more significant advantage in terms of the continuity of dividend growth. The number of years of continuous growth of the Japanese standard dividend per share in the past ten years is between 4 and 7 years, which is higher than 2-4 years in the Eurozone. The average compound annual growth rate of the Eurozone's underlying dividend per share in the past five years has exceeded 8%, higher than Japan's 5.9%. 2) In terms of dividend rates, as of April 23, 2024, the Eurozone's target dividend rate for the past 12 months was greater than 7%, which is higher than Japan.

Consumer goods industry: The dividend growth rate and dividend growth continuity of the high-dividend target in the Japanese consumer goods industry is relatively good. The compound annual growth rate of dividends per share in the past ten years was 3.7%, and dividend per share has been growing continuously for 7 years in the past ten years. In terms of dividend rates, as of April 23, 2024, the dividend rate of high-dividend companies in the consumer goods industry in Japan for the past 12 months was 4.6%. Among the high-dividend index constituents in the Eurozone and Hong Kong, China, there are no targets in the consumer goods industry.

Healthcare industry: The dividend growth rate of Japan's healthcare industry with high dividend targets is in a downward channel, and its dividend growth continues to be average. The compound annual dividend growth rate of the Japanese healthcare industry's high dividend target in the past ten years and five years was -3,0% and -3.9%, respectively, and dividend per share has been growing for only 2 years in the past ten years. None of the high-dividend index constituents in the Eurozone and Hong Kong, China is the target of the healthcare industry.

Information technology industry: Compared with the high dividend target of the Japanese information technology industry, 1) From the perspective of dividend growth, the compound annual dividend growth rate per share of electronic equipment instruments and components has been high in the past ten years, and its dividend growth has continued well. 2) From a dividend rate perspective, as of April 23, 2024, the target dividend rate of the electronic equipment, instruments and components sector for the past 12 months was higher than that of the hardware technology storage and peripheral sector. None of the high-dividend index constituents in the Eurozone and Hong Kong, China are the targets of the information technology industry.

Appendix: Overview of major global market value stock indices

Risk warning

Power game risk: In the context of the big power game between China and the US, friction over trade, technology, finance, etc. may affect the normal production and operation activities of related industries and companies.

Risk of US monetary tightening exceeding expectations: The Federal Reserve raised interest rates more than expected, triggering further compression in global asset valuations, and even raised concerns about the stability of the financial system.

There is a risk that the global economic growth rate will decline more than expected: Under the medium-term direction of the US economic deceleration, the momentum of the US economy will continue to decline, and there is a risk that spillover effects will exceed expectations.

Editor/Jeffrey