Recently, Bank of America Securities analyzed the holdings of active fund managers controlling trillions of dollars in assets, known as 'big fish'. The institution noticed that some investors with relatively small investment amounts and more flexible operations can take advantage of their own strengths. The research found that dividend stocks are still not favored by the 'big fish', and a rotation towards stocks with higher dividend yields is expected to start soon.

Dividend stocks have been out of favor for some time. Over the past five years, the Morningstar U.S. High Dividend Yield Index has underperformed the Morningstar U.S. Market Index by about 30 percentage points. In the past century, dividend stocks have accounted for about 40% of total stock returns, while in the past 10 years, dividend stocks accounted for less than 15%.

This situation is about to change. Bank of America stock and quant analyst Savita Subramanian recently wrote in a report: 'The Fed has started cutting interest rates, and it is expected that short-term rates will fall by about two percentage points in the next cycle. In 2022, a large amount of money flowed into money market funds. We believe that these funds will now flow into asset categories with higher actual yields, such as stocks with higher dividend yields.'

Investors can through $Schwab US Dividend Equity ETF (SCHD.US)$Please use your Futubull account to access the feature.$Vanguard Dividend Appreciation ETF (VIG.US)$ The next breakthrough sought by Wall Street may be individual stock options based on stocks such as [stock name] or [stock name]. At this stage, individual stock options expire once a week, usually on Fridays. To introduce options on individual stocks, exchanges need to add option expiration dates from Monday to Thursday. $iShares Core Dividend ETF (DIVB.US)$ For passive ETF dividend stocks, you can also look for actively managed funds with low holdings by fund managers, attractive dividend yields of stocks. When the demand from institutional investors increases and pushes up the prices of these stocks, investors with relatively small investment amounts will be able to obtain additional returns.

Bloomberg data shows that currently institutions are interested in $JPMorgan (JPM.US)$ and gold miners $Newmont (NEM.US)$ and materials manufacturers$DuPont (DD.US)$energy giants$Exxon Mobil (XOM.US)$and defense contractors $Lockheed Martin (LMT.US)$ holding positions around 70%, much lower than their usual 90% in general stocks.$S&P 500 Index (.SPX.US)$The average dividend yield of these five stocks is 2.3%, with a dividend payout ratio of less than 50%, at a relatively safe level. These five stocks are also favored by Wall Street analysts, with an average "buy" rating ratio of about 63%, compared to the S&P 500 index component stocks' average "buy" rating ratio of about 55%.

Capturing the 'blind spots' of institutional investors has its benefits. Sabbaramanah pointed out that asset management companies that are only long are unprepared for the rise in the Chinese stock market following the Chinese government's new stimulus measures. As of Wednesday, October 3, tracking$NASDAQ Golden Dragon China (.HXC.US)$ETF $Invesco Golden Dragon China ETF (PGJ.US)$ has risen 40% in the past month.

The rapid rise of the Chinese stock market has raised concerns about stocks being overbought and the probability of a pullback increasing. However, more and more institutional investors are joining the buying camp, which means the rebound in the Chinese stock market may last longer than many investors expect. CappThesis founder Frank Cappelleri pointed out that Chinese stock prices are still far below historical highs, so any pullback is an opportunity to buy on dips.

When participating in the 'China market,' return-oriented investors may consider$Alibaba (BABA.US)$,$Tencent Music (TME.US)$,$ZTO Express (ZTO.US)$and $JD.com (JD.US)$ Their average dividend yield is 1.3%, with a payout ratio of less than 30%. The stock price has dropped an average of 55% from its historical high, with an average 'buy' rating ratio of 84%.

Investors can also focus on stocks of U.S. companies with significant business in China. Sabrumania especially mentioned luxury goods companies.$Tapestry (TPR.US)$Please use your Futubull account to access the feature.$Merck & Co (MRK.US)$N/A.$Qualcomm (QCOM.US)$And.$NXP Semiconductors (NXPI.US)$as well as the casino operator Las Vegas$Las Vegas Sands (LVS.US)$These five companies' revenues in the Chinese market account for an average of about 37% of the total revenue, with an average dividend yield of 2.2%, a payout ratio of about 40%, and an average 'buy' rating ratio of about 75%.

As 2025 approaches, it seems like a relatively safe bet to bet on the declining US interest rates and accelerated economic growth in China. These two factors provide investors seeking dividend income with a rich selection of targets, enabling them to gain stable returns while participating in these two major trends.

Editor/Somer