In recent times, the Chinese stock market has witnessed a significant uptick in cash dividends distributed by publicly listed companiesThe guidance from regulatory bodies has yielded impressive results, with a total dividend payout amounting to an astounding 417.1 billion yuan during the first three quarters of 2024. This marks a remarkable year-on-year increase of 86.62%. The surge in dividend payouts is further complemented by a doubling in both the number and scale of dividend-focused ETFs, driven largely by robust demand from investors, particularly institutional ones.

Starting January 1, 2025, a new fee structure implemented by China Securities Depository and Clearing Corporation will reduce the transaction fees for dividend distributions on the Shanghai and Shenzhen stock exchanges by half

Notably, the new fee will be set at 0.5‰ of the total cash distributed, with any amounts over 1.5 million yuan exempt from feesThis financial reform aims to encourage companies to enhance their shareholder return strategies.

Coinciding with this announcement, the State-Owned Assets Supervision and Administration Commission (SASAC) released directives for central enterprises, emphasizing the necessity for listed companies to instill a strong awareness of investor returnsThis includes increasing the frequency of cash dividends, optimizing payment schedules, and raising the overall payout ratiosFollowing these policy changes, various dividend indices, particularly those tracking state-owned enterprises, showed promising performance on December 18, the day after the announcementsThe CSI Dividend Index increased by 0.62%, the CSI State-Owned Enterprise Dividend Index rose 0.67%, while the CSI Central Enterprise Dividend Index saw gains of 1.00%. The Hang Seng Index's focus on Central Enterprises outperformed with a 1.22% increase.

The low-interest-rate environment has intensified the appeal of dividend assets, leading to heightened interest and investment from institutional sources

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By December 23, 2024, the four major dividend indices had posted growth rates of 10.17%, 11.76%, 22.07%, and 27.20%, respectivelyThese figures exemplify how macroeconomic conditions have fostered an environment conducive to higher dividend payouts, positioning these assets as an attractive investment opportunity.

In 2024, the number of dividend ETFs tracking various indices exploded from 20 at the beginning of the year to 39, with total assets under management skyrocketing from 42 billion yuan to 96.6 billion yuanReports from mid-year indicated that institutional investors held 56.83% of these funds, marking an increase of 2.69 percentage points from the start of the yearThis shift demonstrates a growing trend where institutional investment plays a pivotal role in the landscape of dividend investment.

The proliferation of policies fostering greater dividend distribution signals a resolute intent from the government to enhance investor returns

A notification issued by China Settlement on December 17 outlines its intent to bolster incentives for listed companies to distribute dividends more generouslyThe announcement states its objective of promoting a stronger investor return culture among publicly listed companies, thereby instigating increases in dividend payments.

Guidelines indicate that central enterprises must consider various factors, including industry characteristics, profit levels, and cash flow conditions when devising reasonable and sustainable profit distribution policiesThese measures aim to enhance the stability, continuity, and predictability of cash dividendsEnterprises are encouraged to increase the frequency and improve the overall rhythm of their cash dividends.

Research reports from Huatai Securities highlight that these newly instituted policies align in direction and will effectively mitigate the costs associated with increasing dividend distributions—particularly for companies already making substantial payouts—thus encouraging them to raise the frequency and amount of their dividends.

Moreover, listed companies are now urged to adopt tailored cash distribution policies in response to varying circumstances

Companies failing to establish clear shareholder return strategies or neglecting to disclose their cash dividend policies in a detailed manner could face regulatory scrutiny from the China Securities Regulatory CommissionInstances of companies not adhering to established dividend policies could lead to significant reputational consequences, particularly affecting future financing and restructuring endeavors.

The quantitative outcomes of these policy adjustments are staggering; the number of listed companies issuing dividends surged from 249 in the same period of 2023 to 855 in the current year, with total dividend payouts climbing from 223.5 billion yuan to 417.1 billion yuan—a staggering increase of 86.62%.

When examining industry trends, it is noteworthy that in 2023, 28 out of 31 sectors listed in the Shenwan Industry Classification implemented dividend payouts

However, by 2024, every sector had initiated dividend distributions, all showing year-on-year growth.

The rise in popularity of dividend ETFs further accentuates the growing trend of dividend investment in 2024. With the implementation of supportive policies and the natural responses of listed enterprises within the low-interest framework, dividend ETFs emerged as one of the year's major highlights in public funds.

According to data from Dongfang Caifu, 2024 has set records for the number of newly launched dividend ETFs, with 19 introduced by December 23, accounting for 48.72% of the total dividend ETF universe.

Historically, the first dividend ETF to enter the market was the Huatai-PB Dividend ETF, launched in November 2006. Following this, it took several years before the next ETFs emerged—one in 2010 and another in 2018. The years between 2019 and 2021 saw a gradual increase in new products, but the trend flattened in 2022, with no new ETFs launched that year

However, 2023 brought eight new additions, and 2024 promises a remarkable resurgence.

In terms of asset classification, prior to 2024, 19 of the existing 20 dividend ETFs were domestic stock ETFs, primarily tracking domestic indices, while only one was a cross-border ETF tracking indices from overseas markets, including Hong Kong and TaiwanOf the 19 new dividend ETFs launched in 2024, the numbers reflect a more diversified approach: 12 are stock ETFs, with 7 being cross-border ETFs, constituting 36.84% of the total new listings.

Moreover, the variety of underlying indices has expanded, with the dividend ETFs that were launched prior to 2024 tracking 14 different indices—13 related to A-shares and 1 related to cross-border indicesMeanwhile, the newly launched ETFs in 2024 follow 10 different indices, 5 of which are entirely new categories, such as the Shanghai Stock Exchange State-Owned Enterprise Dividend Index and various indices concerning low-volatility dividend stocks in overseas markets.

Overall, as of December 23, the number of tracked indices related to dividend ETFs reached 19. Among them, the CSI Dividend Index and the low-volatility dividend index each have six ETF products, while the Dividend Low Volatility 100 Index has four

The Guo Xin Hang Seng State-Owned Enterprise Dividend Index stands third with three ETF products.

From the perspective of fund management institutions, the number of asset managers engaging with dividend ETFs is steadily increasingBy the end of 2023, data shows that 17 public fund managers had launched dividend ETFsThis number has grown to 25 by December 23, 2024, with the new additions including prominent firms like Fortis, GF Fund Management, Da Cheng, Guotai, Wanjia, Taikang, Yinhai, and Xinhua Fund.

Among these, Fortis, GF, and Wanjia have launched multiple products simultaneouslyNoteworthy launches include the Fortis Low Volatility Dividend ETF and the Central Enterprise Dividend ETF, both debuted in mid-2024. Meanwhile, GF Funds rolled out the Dividend 100 ETF and the Guo Xin Hang Seng State-Owned Enterprise Dividend ETF during the early months of the year.

As of December 23, the leading fund management institutions in terms of dividend ETF assets are Huatai-PB, Invesco Great Wall, and Yifangda, with respective asset sizes of 35.2 billion yuan, 9.3 billion yuan, and 8.9 billion yuan.

In terms of holder demographics, there has been a notable increase in institutional investor interest in dividend ETFs

By the end of 2023, the total issuance of dividend ETF shares stood at 26.1 billion, with institutional investors holding 14.2 billion shares, which accounted for 54.14% of the totalBy mid-2024, this figure had risen to 47.8 billion, with institutional shares escalating to 27.2 billion, raising their proportion to 56.83%, which reflects a notable growth level of 2.69 percentage points.

Taking the largest fund, the Huatai-PB Dividend ETF, as an illustrative case: at the beginning of the year, its share count was 5.681 billion, which increased to 5.810 billion by mid-year, an increment of 129 million sharesIn the same period, the volume held by institutional investors surged from 1.595 billion shares to 2.205 billion shares, marking an increase of 610 million shares.

This data signifies that the funds flowing in from institutional investors not only compensated for the redemptions by individual investors but also surpassed them, highlighting a robust interest from larger stakeholders in navigating dividend avenues.

Specifically, insurance capital has demonstrated a marked increase in allocation towards dividend ETFs