Research

Exploring China A-ShareDividends and High Yield
Strategy PerformanceContributors
Jason Ye, CFA
Director
Factors and Thematics Indicesjason.ye@spglobal.com
Izzy Wang
Senior Analyst
Factors and Dividends
izzy.wang@spglobal.com

Introduction
Dividend indices stand as one of the most recognized factor-based
investment strategies. As of year-end 2023, there were 377
dividend-focused exchange-traded products (ETPs) globally,
amassing over 500 billion in assets under management (AUM). 1 In
the China A-shares market, the dividend strategy surged toprominence as 2024 kicked off, exhibiting robust performance amidst
recent market turbulence. With an AUM increase of over CNY 20
billion in 2023, dividends have emerged as the primary factor
strategy in China's ETF industry.
This paper undertakes a comprehensive examination of the Chinesedividend market, providing insights into the historical performance ofthe high dividend yield strategy.

Dividends in the China A-Share
MarketCash dividends may serve as a significant indicator of a company’s
future prospects and governance discipline, particularly in developed
markets. However, in the China A-shares market, companies havehistorically displayed reluctance to distribute profits to shareholders,
opting instead to retain earnings for reinvestment. Stock dividends
once dominated the market, garnering substantial interest from retailinvestors. This phenomenon underscored a corporate emphasis onrefinancing while neglecting the distribution of earnings toshareholders.
1

Source: Morningstar. Data as of Dec. 31, 2023.

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Exploring China A-Share Dividends and High-Yield Strategy Performance

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In response to the need to enhance shareholder rewards and corporate governance, Chinese
authorities introduced a series of dividend encouragement policies. The China Securities
Regulatory Commission (CSRC), for instance, raised the minimum cash dividend payout levelto 30% in 2008,2 compelling companies to distribute profits. Concurrently, the State
Administration of Taxation (SAT) gradually reduced taxes on dividends to encourage public
investment in dividend-paying stocks. The reduction in personal income tax on dividends from
20% to 10% in 2005, further lowered to 5% in 2013 and eventually eliminated in 2015,3
incentivized investors to hold stocks for more than one year. In 2023, the CSRC issued a"cash dividend guidance for publicly listed companies," urging clarity in dividend policies andstabilization of investor expectations. The document also reiterated the importance of a 30%
dividend payout ratio, and encouraged companies to start paying interim dividends.4 These
policies played a pivotal role in fostering a cash dividend culture in the China A-share market.
As of Dec. 31, 2023, the trailing 12-month dividend yield of the S&P China A Domestic BMI
stood at 1.97%, aligning with the dividend yield level of the S&P Developed BMI andsurpassing that of the S&P 500® (see Exhibit 1). Indexed assets tracking dividend strategies in
the China A-shares market surged from CNY 2 billion in 2013 to CNY 42 billion by Dec. 31,
2023, reflecting an impressive annualized compound annual growth rate (CAGR) of 36% (seeExhibit 2). Moreover, the number of dividend funds tripled over the past four years.
Exhibit 1: Trailing 12-Month Dividend Yield
Trailing 12-Month Dividend Yield (%)

3.50
3.00

2.90

2.33

2.50

1.97

2.00

1.94
1.77
1.47

1.50
1.00

0.50
0.00

Emerging Markets

Japan

China A-Shares

Developed Markets

South Korea

U.S.

Source: S&P Dow Jones Indices LLC. Data as of Dec. 31, 2023. Emerging Markets, Developed Markets, Japan, Korea, U.S. and China Ashares are represented by the S&P Emerging BMI, S&P Developed BMI, S&P Japan BMI, S&P Korea BMI, S&P 500 and S&P China A
Domestic BMI, respectively. Past performance is no guarantee of future results. Chart is provided for illustrative purposes.

2

Notice on Some Issues Regarding Implementation of Different Individual Income Tax Policies of Dividends and Bonuses in Listed
Companies, Caishui (2015) No. 101 (Circular 101), jointly issued by the MOF, SAT and CSRC on Sept. 7, 2015 .

3

Notice on Some Issues Regarding Implementation of Different Individual Income Tax Policies of Dividends and Bonuses in Listed
Companies, Caishui (2012) No. 85 (Circular 85), jointly issued by the MOF, SAT and CSRC on Nov. 16, 2012. Notice on Policies Relating
to Individual Income Tax on Dividends and Bonuses, Caishui (2005) No. 102 (Circular 102), jointly issued by the MOF, SAT and CSRC on
June 13, 2005..

4

Publicly Listed Company Regulation Guidance No.3 – Publicly Listed Companies Cash Dividend, CSRC on Dec.15, 2023.

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Exploring China A-Share Dividends and High-Yield Strategy Performance

February 2024

Exhibit 2: Growth of Dividend Funds in China A-Shares Market
45,00030

40,00030,00020

25,00015

20,00015,000

Number of Funds

AUM (CNY Millions)25
35,00010

10,000

5
5,000
-

0
2010

2011

2012

2013

2014

2015

2016

2017

2018

AUM

Number of Funds

2019

2020

2021

2022

2023

Source: S&P Dow Jones Indices LLC, Morningstar. Data as of Dec. 31, 2023. Past performance is no guarantee of future results. Chart isprovided for illustrative purposes.

The historical data analysis reveals three major characteristics in the China A-share dividend
market:A fast-growing dividend pool;
Diversified sectoral contribution to dividends; andImproving dividend sustainability.

A Fast-Growing Dividend Pool
The size of the dividend pool in the China A-shares market has experienced remarkable
growth. In 2023, the total common dividends paid reached a record high of CNY 2.07 trillion,
surpassing the figure in 2010 by more than fivefold (see Exhibit 3). The number of companies
distributing dividends more than tripled, from 897 in 2010 to over 3,000 in 2023, marking an
increase from 54.5% to 68.2% in stock count percentage.

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Exploring China A-Share Dividends and High-Yield Strategy Performance

February 2024

Exhibit 3: Evolution of Dividends Pool in the China A-Share Market
Year

Size of Dividend
Pool (CNY Billions)

Earnings (CNY
Billions)

Payout Ratio (%)

Trailing 12-MonthDividend Yield (%)

Number ofCompanies that
Pay Dividends

2010

386.3

1,526.6

25.3

0.8

897

2011

472.6

1,731.3

27.3

1.3

1,107

2012

583.3

1,857.9

31.4

1.6

1,234

2013

653.1

2,116.5

30.9

1.8

1,349

2014

734.1

2,270.9

32.3

1.3

1,499

2015

756.3

2,262.6

33.4

1.1

1,554

2016

793.2

2,476.5

32.0

1.5

1,587

2017

879

3,094.7

28.4

1.3

1,880

2018

1,090.3

3,193.3

34.1

2.2

2,100

2019

1,165.2

3,483.5

33.4

1.8

2,014

2020

1,315.4

3,723.8

35.3

1.4

2,587

2021

1,529.8

4,618.7

33.1

1.4

2,995

2022

1,883.9

4,968.8

37.9

1.9

3,193

2023

2,072.7

-

-

2.0

3,289

Source: S&P Dow Jones Indices LLC, FactSet. Data as of Dec. 31, 2023. Most of the earnings in 2023 were not released at the time of thisarticle. Only includes companies in the S&P China A Domestic BMI that paid regular cash dividends. The S&P China A Domestic BMI was
launched Nov. 27, 2013. All data prior to index launch date is back-tested hypothetical data. Past performance is no guarantee of future
results. Table is provided for illustrative purposes and reflects hypothetical historical performance. Please see the Performance Disclosure at
the end of this document for more information regarding the inherent limitations associated with back -tested performance.

In comparison with international markets, China A-shares was the largest emerging market
dividend payer and one of the fastest-growing dividend markets (see Exhibit 4). In 2023, thetotal cash dividend payment for China A-shares was more than double that of Japan and morethan 40% of the total dividends in the U.S. Over the 10-year period from 2013 to 2023,
Chinese equities exhibited an annual dividend growth rate of 10.6%, substantially higher than
the global average of 4.7%.

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Exploring China A-Share Dividends and High-Yield Strategy Performance

February 2024

Exhibit 4: International Markets Dividend Pool Size and Dividend Growth Rate
12.0%
10.6%

2153.310.0%

2000

Dividend GrowthSize of Dividend Pool (USD Billions)

2500

1500

1000
688.4
500

291.9

8.0%
6.0%

5.6%

5.3%

U.S.

Japan

4.7%
4.0%

2.0%

130.2
0.0%

Global

U.S.

Japan

China A

GlobalChina A

Source: S&P Dow Jones Indices LLC, FactSet. Data as of Dec. 31, 2023. Global market is represented by the S&P Global BMI. U.S., Japan,
and Korea are represented by companies domiciled in each of the markets from the S&P Global BMI. China A is represented by the S&P
China A Domestic BMI. Size of dividend pool represents the year 2023. Dividend growth represents data from 2013 to 2023. The S&P China
A Domestic BMI was launched Nov. 27, 2013. All data prior to index launch date is back-tested hypothetical data. Past performance is no
guarantee of future results. Charts are provided for illustrative purposes and reflect hypothetical historical performance. Please see the
Performance Disclosure at the end of this document for more information regarding the inherent limitations associated with ba ck-tested
performance.

Chinese companies are not only displaying an increased willingness to pay cash dividends but
are also distributing a larger portion of profits. The payout ratio increased from 25.3% in 2010
to 37.9% in 2022. Following the CRSC's policies in 2012, which further mandated listedcompanies to disclose their dividend policies, the payout ratio surpassed 30% and has
remained consistently above that level since. The payout ratio for 2022 of the China A-sharemarket was comparable to that of the U.S. market and higher than that of the Japan and Korea
markets (see Exhibit 5).
Exhibit 5: Dividend Payout Ratio in the International Markets
45.0%

39.9%
40.0%

37.9%
36.6%

Payout Ratio

35.0%

32.2%

30.0%
23.6%

25.0%

20.0%
15.0%

10.0%
5.0%

0.0%
Global

U.S.

Japan

Korea

China A

Source: S&P Dow Jones Indices LLC, FactSet. Data as of Dec. 31, 2022. Global market is represented by the S&P Global BMI. U.S., Japanand Korea are represented by companies domiciled in each of the markets from the S&P Global BMI. China A is represented by S&P China A
Domestic BMI. Payout ratio represents total dividends divided by total earnings reported in 2022. Past performance is no guarantee of future
results. Chart is provided for illustrative purposes.
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Exploring China A-Share Dividends and High-Yield Strategy Performance

February 2024

Diversified Sectoral Contribution to Dividends
Historically, the dividend pool of the China A-share market exhibited a significant concentrationin the Financials, Energy and Industrials sectors. Dividends from Financials accounted forover 50% of the total dividends from 2010 to 2016, while dividends from the Energy sector
were consistently above 20% from 2010 to 2012. However, over the past seven years, thepercentage contribution from Financials and Energy has been on a declining trend (see Exhibit
6). By 2023, the combined contribution from these two sectors had decreased to below 50%(see Exhibit 7).
Exhibit 6: Historical Sector Breakdown of the Total Dividends in the S&P China A
Domestic BMI
100%

90%

Dividend Share

80%
70%
60%
50%
40%
30%
20%
10%
0%
2010

2011

2012

2013
Financials

2014

2015
Energy2016

2017
Industrials

2018

2019

2020

2021

2022

2023

Others

Source: S&P Dow Jones Indices LLC, FactSet. Data as of Dec. 31, 2023. The S&P China A Domestic BMI was launched Nov. 27, 2013. Alldata prior to index launch date is back-tested hypothetical data. Past performance is no guarantee of future results. Chart is provided forillustrative purposes and reflects hypothetical historical performance. Please see the Performance Disclosure at the end of this document for
more information regarding the inherent limitations associated with back-tested performance.

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Exploring China A-Share Dividends and High-Yield Strategy Performance

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Exhibit 7: 2023 Sector Weight and Dividends Breakdown in the S&P China A Domestic
BMI
Sector Weight

Div idends
1.5%

2.3% 1.8%
3.0%
3.0%

5.7%
15.1%

19.3%

11.1%

8.1%
6.6%
8.9%

3.1%
18.7%

5.3%

9.4%

34.1%

5.8%
4.0%

12.5%

12.9%

7.7%

Information Technology

Industrials

Financials

Materials

Health Care

Consumer Staples

Consumer Discretionary

Utilities

Communication Services

EnergyReal Estate

Source: S&P Dow Jones Indices LLC, FactSet. Data as of Dec. 31, 2023. Charts are provided for illustrative purposes.

Exhibit 8 illustrates the 10-year CAGR of dividends in each sector. Almost all sectors haveexperienced double-digit growth over the past decade. Communication Services, Information
Technology, Health Care, and Materials all exhibited a CAGR of over 20%. With dividends
from non-traditional sectors growing at a faster pace, the concentration in Financials andEnergy has diminished, leading to a more balanced distribution of dividends among sectors.
Exhibit 8: Compound Annual Growth Rate of Sector Dividends
70.0%

63.5%

60.0%

CAGR

50.0%
40.0%

31.4%
30.0%

26.2%
20.1%

20.0%

17.4%

14.9%

12.5%

11.2%

10.7%

7.1%

10.0%
0.0%
Communication Services

Information Technology

Health Care

Materials

Consumer Staples

Industrials

Utilities

Consumer Discretionary

EnergyFinancials

Source: S&P Dow Jones Indices LLC, FactSet. Data from Dec. 31, 2013, to Dec. 31, 2023. Chart is provided for illustrative purposes.
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Exploring China A-Share Dividends and High-Yield Strategy Performance

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Improving Dividend Sustainability
Dividend sustainability ensures a steady stream of income and reflects the financial health of acompany. A sustainable dividend payment underscores a company's commitment togenerating stable cash flows for its shareholders.
Exhibit 9 illustrates the number of companies that increased, maintained or cut dividend
payments compared to the previous year. In 2023, 1,726 stocks increased dividend payments
on a year-over-year basis, marking a substantial increase from 551 in 2010. Overall, thenumber of companies with increased dividends has steadily grown since 2010, notwithstanding
temporary drops in 2012 and 2019. However, although there were a growing number ofcompanies that increased dividends, the number of companies that cut dividends also
increased over the past five years, which shows the developing nature of the China A-shares
dividend market, and that many companies are still lacking the commitment to maintain stabledividend payments.
Exhibit 9: Companies Year-over-Year Dividend Change in S&P China A Domestic BMI
Number of Companies

2,500
Maintained

Increased

2011

2013

Cut

2,000
1,500
1,000
500
2010

2012

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Source: S&P Dow Jones Indices LLC, FactSet. Data as of Dec. 31, 2023. The S&P China A Domestic BMI was launched Nov. 27, 2013. Alldata prior to index launch date is back-tested hypothetical data. Chart is provided for illustrative purposes and reflects hypothetical historicalperformance. Please see the Performance Disclosure at the end of this document for more informat ion regarding the inherent limitations
associated with back-tested performance.

It is a common practice for companies listed in the China A-share market to pay dividends
once a year (see Exhibit 10). The majority of ex-dividend dates fall between May and July.
For instance, in 2023, over 80% of cash dividends were effective during this period (see Exhibit
11).
Exhibit 10: Dividend Payment Frequency of Companies in S&P China A Domestic BMI
Annual4%

Interim96%

Source: S&P Dow Jones Indices LLC, FactSet. Data as of Dec. 31, 2023. Chart is provided for illustrative purposes.
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Exploring China A-Share Dividends and High-Yield Strategy Performance

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Exhibit 11: Cash Dividend Ex-Date Distribution by Month in 2023
January2%

2% 1%

1% 0% 0% 0%3%February
4%
March
April
May

25%
20%

June

July
AugustSeptember
OctoberNovember
December

42%

Source: S&P Dow Jones Indices LLC, FactSet. Data as of Dec. 31, 2023. Chart is provided for illustrative purposes.

On Dec. 15, 2023, the CSRC released new guidance5 for cash dividend distribution,
streamlining the process of interim dividend approval and encouraging wider adoption ofinterim dividend schedules in the China A-share market. Notably, starting with blue-chipstocks such as PetroChina, China Petroleum & Chemical Corp, Ping An Insurance and China
Telecom, 132 companies had already adopted interim dividends as of Dec. 31, 2023. The
trend suggests promising prospects for more Chinese companies to initiate interim dividends inthe future.

High Dividend Yield Strategy Performance
A wealth of literature highlights the historical outperformance of strategies focused on highdividend yield stocks compared to both the broader market and strategies targeting low
dividend yield stocks. In their research, Fama and French6 identified an increasing predictive
power of dividend yield on long-term stock returns as the forecast horizon extended frommonths to years.
One notable strategy, "The Dogs of the Dow," is a straightforward investment approach thatentails purchasing the 10 stocks in the Dow Jones Industrial Average® (DJIA) with the highest
dividend yield and rebalancing annually. Michael O’Higgins’7 study spanning 26 years
revealed that this high dividend yield portfolio generated an impressive 17.9% annualized
return, outperforming the 13% annualized return of the DJIA.
5

Publicly Listed Company Regulation Guidance No.3 – Publicly Listed Companies Cash Dividend, CSRC on Dec.15, 2023.

6

Fama, Eugene F., and K. R. French. “Dividend Yields and Expected Stock Returns.” Journal of Financial Economics, Vol. 22, I ssue 1, pp.
3-25. October 1988.

7

O'Higgins, Michael, and John Downes. “Beating the Dow.” HarperCollins. 1991.

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Exploring China A-Share Dividends and High-Yield Strategy Performance

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Similarly, Jeremy Siegel’s8 examination, which involved ranking stocks in the S&P 500 by
dividend yield and grouping them into five quintile portfolios rebalanced annually,
demonstrated compelling results. Over the period from 1957 to 2002, the highest yield quintile
boasted a 14.27% annualized return, surpassing the S&P 500's annualized return of 11.18%.
Robert Arnott’s9 extensive analysis, which parsed 200 years of U.S. equity total returns from1802 to 2002 into four components (dividend, real dividend growth, inflation and valuation
expansion), underscored the important role of dividends in driving real returns from stocks.
Arnott concluded that dividends constitute the primary source of real return from equities,
accounting for 5.0% of the total annualized return of 7.9% over the analyzed period.
In the subsequent section, we will conduct an empirical study to understand the performanceof the high dividend yield strategy in the China A-share market.

Empirical Study
In line with previous research on dividends, we conducted an analysis of hypothetical portfolios
based on trailing 12-month dividend yield. Our study encompassed all stocks listed on the
Shanghai Stock Exchange and the Shenzhen Stock Exchange with a float market
capitalization exceeding USD 150 million, and they must have been traded on the portfolio
construction day.
While most Chinese companies distribute dividends annually (see Exhibit 11), our analysis
revealed ex-dividend dates occurring throughout the second half of the year, prompting us torebalance the hypothetical portfolios semiannually at the end of each January and July.
We sorted dividend-paying stocks according to their trailing 12-month dividend yield andallocated them to five hypothetical portfolios based on yield, ranging from the highest to thelowest dividend yield, with non-dividend-paying companies assigned to a separate sixth
portfolio.
Exhibit 12 illustrates the equal-weighted returns of each hypothetical portfolio. Our analysis
indicates that across most of the back-tested time frames as of Dec. 31, 2023, the highdividend yield portfolio consistently outperformed other portfolios. The relationship between
yield and historical performance exhibited a clear monotonic trend, with historical performanceincreasing as we moved from the low yield quintile portfolio to the high yield quintile portfolio.
The risk, as measured by the annualized standard deviation of monthly returns, was highest for
the hypothetical low dividend yield portfolio. Conversely, among dividend payers, the high8Siegel, Jeremy J. "The Future for Investors: Why the Tried and the True Triumph over the Bold and the New." Crown Business. 2005.

9

Arnott, Robert D. “Dividends and the Three Dwarfs.” Financial Analysts Journal, Vol. 59, Issue 2, pp. 4 -6. 2003.

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Exploring China A-Share Dividends and High-Yield Strategy Performance

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yield portfolio demonstrated the lowest risk across various sample periods. The risk/return
profile of the non-dividend payer portfolio closely resembled that of the broader market.
Exhibit 13 provides a look at the growth of hypothetical portfolio levels, demonstrating thatsince Jan. 31, 1999, the high dividend yield portfolio significantly outperformed other portfolios,
as well as the equal-weighted broad market portfolio.
Exhibit 12: Historical Equal-Weighted Performance of China A-Shares Stocks Sorted
into Hypothetical Dividend Portfolios

Annualized Compound Returns

20%

15%

10%

5%

0%

-5%
Full Period

1-Year

3-YearHigh Yield

Quintile 2

Medium Yield

Full Period

1-Year

3-YearHigh Yield

Quintile 2

Medium Yield

5-Year

7-Year

10-Year15-Year

Quintile 4

Low Yield

Non-Payers

Market5-Year

7-Year

10-Year15-Year

Quintile 4

Low Yield

Non-Payers

MarketAnnualized Standard Deviation

35%
30%

25%
20%
15%
10%
5%

0%

All portfolios are hypothetical.
Source: S&P Dow Jones Indices LLC, FactSet. Data from Jan. 31, 1999, to Dec. 31, 2023. Index performance based on total returns in CNY.
Past performance is no guarantee of future results. Charts are provided for illustrative purposes and reflect hypothetical historicalperformance. Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations
associated with back-tested performance.

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Exhibit 13: Historical Cumulative Portfolio Levels of China A-Shares Stocks Sorted into
Hypothetical Dividend Portfolios
5000
4500

4000

Performance

3500
3000
2500

2000
1500
1000

500

MarketHigh Yield

Quintile 2

Medium Yield

Low Yield

January 2023

September 2023

May 2022

September 2021

May 2020

January 2021

September 2019

May 2018

January 2019

September 2017

May 2016

Quintile 4

January 2017

September 2015

May 2014

January 2015

September 2013

May 2012

January 2013

September 2011

May 2010

January 2011

September 2009

May 2008

January 2009

September 2007

May 2006

January 2007

September 2005

May 2004

January 2005

September 2003

May 2002

January 2003

September 2001

May 2000

January 2001

January 1999

September 1999

0

Non-Payers

All portfolios are hypothetical.
Source: S&P Dow Jones Indices LLC, FactSet. Data from Jan . 31, 1999 to Dec. 31, 2023. Index performance based on total returns in CNY.
Past performance is no guarantee of future results. Chart is provided for illustrative purposes and reflects hypothetical historical performance.
Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations associated withback-tested performance.

We further assessed the performance of the hypothetical market-cap-weighted portfolio andobserved similar return patterns. The volatility of the high dividend yield portfolio wasconsistently the lowest among dividend payers and the performance was the best among mostof the time frames. To address the concern that the outperformance may be the result ofsector allocation effects, we replicated the study by sorting stocks into different yield quintile
portfolios within sectors (a sector-neutral approach). The results remained consistent,
indicating that the excess return of the high yield portfolio cannot solely be attributed to theweighting effect or sector allocation (see Exhibits 15 and 16 in the Appendix).
Exhibit 13 also reveals the cyclicality of performances. We analyzed the rolling three-year
return and tracking error of the hypothetical high and low yield market-cap-weighted portfolios
against the S&P China A Domestic BMI (see Exhibit 14). The analysis illustrates a contrasting
performance cycle between the high and low yield portfolios. While the low yield portfolio
experienced three main underperformance periods, the high yield portfolio outperformed the
S&P China A Domestic BMI for the majority of the observed period.

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Exploring China A-Share Dividends and High-Yield Strategy Performance

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Rolling 3-Year Excess Return

Exhibit 14: Rolling Three-Year Cap-Weighted Performance of China A-Share Stocks
Sorted into Hypothetical Dividend Portfolios against the S&P China A Domestic BMI
20%
15%
10%
5%
0%
-5%
-10%
-15%

2017

2018

2019

2020

2021

2022

2023

2017

2018

2019

2020

2021

2022

2023

Rolling 3-Year Tracking Error

High Yield

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

-20%

Low Yield

12%
10%
8%

6%
4%

2%

High Yield

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

0%

Low Yield

All portfolios are hypothetical.
Source: S&P Dow Jones Indices LLC, FactSet. Data from Jan . 31, 2003, to Dec. 31, 2022. Index performance based on total returns in CNY.
The S&P China A Domestic BMI Index was launched Nov. 27, 2013. All data prior to index launch date is back-tested hypothetical data. Past
performance is no guarantee of future results. Charts are provided for illustrative purposes and reflect hypothetical historical performance.
Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations associated withback-tested performance.

Summary
Over the past year, significant improvements have been made in fostering a culture of dividend
payment within the China A-share market. Regulatory initiatives have been instrumental inencouraging companies to adopt more transparent and regular dividend payment practices.
Moreover, the performance of high dividend yield strategies in the stock market has been
noteworthy. In this paper, we provide a review of the China A-Share dividend market's
development. Our hypothetical back-tested analysis of the performance of high yieldstrategies spanning the last 25 years indicates that high yield portfolios in the China A-shares
have consistently outperformed both low yield and the broader market portfolios. Moreover,this outperformance was achieved while maintaining a relatively low level of volatility. Last but
not least, neither the weighting scheme nor the sector allocation effect fully accounted for theobserved performance disparities. There were some strong excess returns historicallyresulting from a strategy focusing on high dividend yield stocks in the China A-share market.
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Appendix
Exhibit 15: Historical Cap-Weighted Performance of China A-Shares Stocks Sorted into
Hypothetical Dividend Portfolios
Annualized Compound Returns

15%
10%
5%

0%
-5%
-10%
-15%
-20%
Full PeriodHigh Yield

1-YearQuintile 2

3-Year

5-Year

7-Year

10-Year15-YearMedium Yield

Quintile 4

Low Yield

Non-Payers

Market3-Year

5-Year

7-Year

10-Year15-YearMedium Yield

Quintile 4

Low Yield

Non-Payers

MarketAnnualized Standard Deviation

35%
30%
25%
20%
15%
10%
5%
0%
Full PeriodHigh Yield

1-YearQuintile 2

All portfolios are hypothetical.
Source: S&P Dow Jones Indices LLC, FactSet. Data from Jan . 31, 1999, to Dec. 31, 2023. Index performance based on total returns in CNY.
Past performance is no guarantee of future results. Charts are provided for illustrative purposes and reflect hypothetical historicalperformance. Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations
associated with back-tested performance.

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Exploring China A-Share Dividends and High-Yield Strategy Performance

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Exhibit 16: Sector Neutral Historical Equal-Weighted Performance of China A-Shares
Stocks Sorted into Hypothetical Dividend Portfolios

Annualized Compound Returns

20%

15%

10%

5%

0%

-5%
Full PeriodHigh Yield

1-YearQuintile 2

3-Year

5-Year

7-Year

10-Year15-YearMedium Yield

Quintile 4

Low Yield

Non-Payers

Market3-Year

5-Year

7-Year

10-Year15-YearMedium Yield

Quintile 4

Low Yield

Non-Payers

MarketAnnualized Standard Deviation

35%
30%
25%
20%
15%

10%
5%
0%
Full PeriodHigh Yield

1-YearQuintile 2

All portfolios are hypothetical.
Source: S&P Dow Jones Indices LLC, FactSet. Data from Jan . 31, 1999, to Dec. 31, 2023. Index performance based on total returns in CNY.
Past performance is no guarantee of future results. Charts are provided for illustrative purposes and reflect hypothetical historicalperformance. Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations
associated with back-tested performance.

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Performance Disclosure/Back-Tested Data
The S&P China A Domestic BMI Index was launched Nov. 27, 2013. All information presented prior to an index’s Launch Date is hypothetical(back-tested), not actual performance. The back-test calculations are based on the same methodology that was in effect on the index Launch
Date. However, when creating back-tested history for periods of market anomalies or other periods that do not reflect the general current
market environment, index methodology rules may be relaxed to capture a large enough universe of securities to simulate the t arget market
the index is designed to measure or strategy the index is designed to capture. For example, market capitalization and liquidity thresholds may
be reduced. Complete index methodology details are available at www.spglobal.com/spdji. Past performance of the Index is not an indicationof future results. Back-tested performance reflects application of an index methodology and selection of index constituents with the benefit ofhindsight and knowledge of factors that may have positively affected its performance, cannot account for all financial risk that may af fect
results and may be considered to reflect survivor/look ahead bias. Actual returns may differ significantly from, and be lower than, back-tested
returns. Past performance is not an indication or guarantee of future results. Please refer to the methodology for the Index for more details
about the index, including the manner in which it is rebalanced, the timing of such reba lancing, criteria for additions and deletions, as well as
all index calculations. Back-tested performance is for use with institutions only; not for use with retail investors.
S&P Dow Jones Indices defines various dates to assist our clients in providing t ransparency. The First Value Date is the first day for which
there is a calculated value (either live or back-tested) for a given index. The Base Date is the date at which the index is set to a fixed value forcalculation purposes. The Launch Date designates the date when the values of an index are first considered live: index values provided forany date or time period prior to the index’s Launch Date are considered back-tested. S&P Dow Jones Indices defines the Launch Date as thedate by which the values of an index are known to have been released to the public, for example via the company’s public website or its data
feed to external parties. For Dow Jones-branded indices introduced prior to May 31, 2013, the Launch Date (which prior to May 31, 2013, wastermed “Date of introduction”) is set at a date upon which no further changes were permitted to be made to the index methodol ogy, but that
may have been prior to the Index’s public release date.
Typically, when S&P DJI creates back-tested index data, S&P DJI uses actual historical constituent-level data (e.g., historical price, market
capitalization, and corporate action data) in its calculations. As ESG investing is still in early stages of development, certain datapoints used to
calculate S&P DJI’s ESG indices may not be available for the entire desired period of back-tested history. The same data availability issue
could be true for other indices as well. In cases when actual data is not available for all relevant historical periods, S&P DJI may employ aprocess of using “Backward Data Assumption” (or pulling back) of ESG data for the calculation of back -tested historical performance.
“Backward Data Assumption” is a process that applies the earliest actual live data point available for an index constituent company to all priorhistorical instances in the index performance. For example, Backward Data Assumption inherently assumes that companies curren tly not
involved in a specific business activity (also known as “product involvement”) were never involved historically and similarly also assumes thatcompanies currently involved in a specific business activity were involved historically too. The Backward Data Assumption all ows the
hypothetical back-test to be extended over more historical years than would be feasible using only actual data. For more information on“Backward Data Assumption” please refer to the FAQ. The methodology and factsheets of any index that employs backward assumption in the
back-tested history will explicitly state so. The methodology will include an Appendix with a table setting forth the specific dat a points andrelevant time period for which backward projected data was used.
Index returns shown do not represent the results of actual trading of investable assets/securities. S&P Dow Jones Indices mai ntains the index
and calculates the index levels and performance shown or discussed but does n ot manage actual assets. Index returns do not reflect paymentof any sales charges or fees an investor may pay to purchase the securities underlying the Index or investment funds that are intended to track
the performance of the Index. The imposition of th ese fees and charges would cause actual and back-tested performance of the
securities/fund to be lower than the Index performance shown. As a simple example, if an index returned 10% on a US $100,000 investment
for a 12-month period (or US $10,000) and an actual asset-based fee of 1.5% was imposed at the end of the period on the investment plus
accrued interest (or US $1,650), the net return would be 8.35% (or US $8,350) for the year. Over a three -year period, an annual 1.5% fee
taken at year end with an assumed 10% return per year would result in a cumulative gross return of 33.10%, a total fee of US $5,375, and acumulative net return of 27.2% (or US $27,200).

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