After navigating through a tumultuous October, the landscape for dividend assets appears to be shifting, inviting renewed interest from investorsRecently, there has been a notable convergence of themes around dividend and small-cap stocks, signaling a revival in the dividend segment, where funds are once again flowing inNotably, dividend-focused ETFs have seen net inflows for five consecutive weeks, with the overall size of these funds surpassing 80 billion yuan by December 7.

This raises intriguing questions: Will adjusted dividend assets emerge as a leading investment theme as we approach the year’s end? Can dividends become the primary strategy for investors to consider as they enter the new year?

To understand this dynamic, it’s important to look at the history of dividend assets over the past several monthsSince late May, dividend stocks experienced four months of adjustment, only to see a dramatic resurgence following the rally on September 24. Despite this positive momentum, October brought new volatility, and dividend assets struggled to regain their footing amidst fluctuating market conditions and the resulting investor apprehension.

As November unfolds, particularly in the last two weeks, it appears the dividend narrative is gaining traction once againAs of December 6, the China Securities Dividend Index and the Low Volatility Dividend Index have risen nearly 4.5% over the past fortnight, outperforming the CSI 300 Index by approximately 1.7 percentage points.

In addition, a significant shift occurred on December 2, when the yield on the 10-year government bond dipped below 2%, marking a historic low not seen since April 2002. In this context, dividend assets are rising in prominence as they become more attractive to investors, leading to a consistent influx of capital into dividend-related ETFs, with the most recent total assets climbing to 82.589 billion yuan by December 7.

This evolving market scenario illustrates two vital characteristics of dividend strategies

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Firstly, they act as a "defensive shield" during economic uncertainty, providing stability in downturnsConversely, they also hold the potential of being a "yield spear," providing investors with lucrative returns even in growing marketsHistorically, high-dividend strategies have been perceived primarily as safe havens suited for bear markets and not particularly strong in bullish scenariosHowever, recent analyses suggest this viewpoint might need reevaluation.

Over the past ten years, comparisons between the China Securities Dividend Total Return Index and the CSI 300 Index reveal that dividend assets have consistently outperformed during periods of market volatility, demonstrating robust defensive capabilitiesFor instance, during the market upswings of 2014 and 2017, dividend assets not only held their ground but surpassed broader market performanceIn bull markets such as 2019 and 2020, they have also exhibited stable growth, suggesting that their performance extends beyond mere defensive plays.

If we broaden our temporal perspective, it becomes evident that dividend strategies possess a higher success rate that is not merely confined to bear market conditionsAnalyzing the rebounds from market lows during critical periods of 2006-2007, 2016-2017, and 2021, sectors correlated with high dividends exhibited exceptional performance, significantly outpacing other sectors.

Three prevailing trends point toward the robust positioning of dividend assets within investment portfoliosFirstly, the increase in uncertainty both domestically and internationally, particularly in macroeconomic conditions and geopolitical risks, renders the market risk-averseDividend assets are viewed as relatively stable investments amidst this turbulence.

Secondly, in response to the volatility of recent years, regulatory bodies have actively encouraged listed companies to implement dividend policiesThe steady rise in the number and amount of dividends paid by A-share companies creates a conducive environment for dividend investments

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