China Dividend Stocks

More attention, more opportunities

News surrounding Chinese stocks is much followed today around the world: the
country produces 143 companies in the World Fortune 500, and is attracting more
international investment through the integration of Shanghai, Shenzhen, and Hong
Kong stock exchanges.

While the Chinese stock market is known for its high volatility, and short-term
speculation is holding absolute dominance in the mainland, choosing a
dividend-based investment approach is definitely plausible given the wide range
of outstanding Chinese companies you can choose from.

On this note, let me show you three excellent Chinese dividend stocks. Let’s roll!

China Shenhua Energy (1088.HK / 601088.SH)

This state-backed energy giant made nearly 40 billion CNY profit in 2020, and is
generous enough to give its investors 36 billion in dividends. In the year before,
their dividend yield was 7.7%, strikingly beautiful! No one has really confirmed
the reasons behind such generosity, but rumors say that the government would
want a state-backed country to redirect Chinese stock market’s trends to value
investment, and set an example through high dividend returns.

Although with fascinating dividends, the stock’s price tends to move around a lot,
just like other cyclical stocks. This creates a potential risk for anyone wishing to
hold this stock for longer periods of time. In 2020, Shenhua’s stock price peaked
around 20CNY, and had dropped down to around 14CNY.

Bank Of Communications (3328.HK / 601328.SH)

Founded in 1908, Bank of Communications is one of the most historical major
banks in modern China. The bank is very well-known for its credit card services,
and is the first Chinese commercial bank listed on the Hong Kong stock exchange.
Needless to say, the bank operates as China’s pioneer in economic reform, and has
a large client base, so investing in its stocks is commonly considered low-risk.

For the year of 2020, Bank of Communications is giving away 12.44 billion CNY in
dividend, following the year 2019’s 12.36 billion CNY. That means investors are
getting around 6%-7% dividend yield every 12 months, and possibly more in the
coming years.

An extra plus for investing in Bank of Communications is its stock’s low volatility
and relatively cheap price per share. Still, do look out for financial news as this year
several major banks are fined for bad internal control. Who knows what will come
next?

Poly Developments and Holding Group (600048.SH)

Unless you live in China’ s rural areas, you will likely find Poly residential buildings
in your town. This real estate group is still pretty young, and sometimes it does
not even have a good reputation, but you can definitely see Poly’s involvement
when cities like Shanghai, Beijing, Shenzhen, and Guangzhou start to be noticed
internationally. With development projects covering shopping malls, cinema,
office buildings, residential houses, and more, Poly has an important place in
China.

For 2020, Poly has a dividend yield of around 6%, making it the most generous
among major Chinese real estate developers, although the volatility of its stock
may pose a threat to dividend-aiming investors. In recent weeks Poly’s stock price
is sliding down rather quickly due to China’s new third-child policy, which purports
to relieve the young generations’ parenting pressure through cutting down house
prices. However most Chinese investors are still bullish on Poly at this moment,
since sales statistics are pretty positive, and the group’s executives are
accumulating Poly stocks.

So maybe it will be a good chance to buy low? I will let you decide.

Zhaoji Xu, London School of Economics and Political Science

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