We are excited to share with you the portfolio of the month from Quantifeed – Mini Dividend Winners HK. This strategy has outperformed the Hong Kong equity market in 2023.
The ability to pay dividends is a crucial indicator of a company’s financial health. However, the ongoing pandemic and its aftermath continue to impact the earnings of many businesses. Therefore, when a company chooses to pay dividends amidst rising borrowing rates and economic uncertainty, it signifies their optimism regarding their future business outlook.
From a valuation perspective, a high dividend yield indicates that a stock is undervalued and therefore attractive to value investors。
Our Mini Dividend Winners HK strategy focuses on selecting Hong Kong-listed stocks with a high dividend yield. To ensure sustainable dividends, we exclude stocks with a dividend yield exceeding 10%, which is unusual. Additionally, REITs are not considered in our selection.
We assess stocks that meet these criteria: covered by at least six equity analysts with an aggregate rating from hold to buy, market capitalisation greater than HKD 100 million, and daily liquidity greater than HKD 5 million. The stocks should also have a minimum lot value (calculated as the round lot size times the market price) less than HKD 10,000.
Next, we rank the filtered stocks by their realised volatility and select those in the second lowest volatility decile. Finally, we choose the 5 stocks with the highest dividend yield.
This systematic approach ensures the stocks we choose have robust dividend potential and strike a balance between stability and profitability, offering our investors the best opportunities for long-term growth and income.
As of 31st March 2023, the six month return of the strategy is 20.8% which outperforms the Hong Kong equity market which has return of 18.5% during the same period. The strategy also outperforms the Consumer Discretionary and Consumer Staple sectors which has six month return of 11.6% and 6.7% respectively.
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