Introduction
Amid the prolonged decline in the Hong Kong equity market spanning from 2020 to 2023, investors faced formidable challenges navigating the landscape of listed stocks in Hong Kong. However, during this turbulence, a strategy that combines high dividends with a low volatility screen emerged as a strong performance generator. S&P Dow Jones Indices (S&P DJI) has been at the forefront of integrating low volatility and high dividend factors since 2012, when we launched the first index of its kind, the S&P 500® Low Volatility High Dividend Index. In previous research studies like "The Beauty of Simplicity: The S&P 500 Low Volatility High Dividend Index" and "Blending Low Volatility with Dividend Yield in the China A-Share Market," S&P DJI's research team underscored the efficacy of integrating these factors in both the U.S. and China A-Shares markets. Building upon this foundation, our index offering extends to the Hong Kong-listed stock market.
In this paper, we introduce the S&P Access Hong Kong Low Volatility High Dividend Index, a pioneering index that tracks 50 high dividend yield stocks within the S&P Access Hong Kong Index universe. Through our exploration, we shed light on the historical performance and characteristics of this index.
Empirical Study
In a related paper, “Exploring China A-Share Dividends and High-Yield Strategy Performance,” we performed an empirical study of quintile analysis on hypothetical portfolios sorted by dividend yield in the China A-Shares market. We extended the same framework to conduct an analysis of stocks in the Hang Seng Composite Index (HSCI) universe.
We sorted dividend-paying stocks according to their trailing 12-month dividend yield and allocated them to five hypothetical portfolios based on dividend yield, ranging from highest to lowest, with non-dividend-paying companies assigned to a separate sixth portfolio. We rebalance the hypothetical portfolios semi-annually at the end of January and July.
