How should investors look for treasure in high-yield stocks?

In the near future, many times the withdrawal of Technology shares has been encouraging, and in February of this year it is worth noting that it is worth mentioning (Hong Kong stocks perform well after the year). It's been more unexpected lately.”Mainlanders considering a reduction in dividend tax or consideration” The news, which greatly improved the high yield stocks, $Hang Seng High Dividend Yield Index(800754.HK)$Significantly increased today. $Hang Seng Index(800000.HK)$Closer to the 19000 point barrier. This article will help investors understand how the dividend tax relief for Mainland investors can boost share prices.

Simple understanding of large line model calculations

Higher stock reserves follow today's share tax release leading to share price gains, primarily because it will change the way the pricing of the stock's Target Price is calculated. The models used by Institutional Investors in the General High Yield, or Value Shares as we call them, do not usually include the DCF (Discounted Cash Flow Cash Flow Cash Flow Discounting Model) or DDM (Dividend Discount Model). The main reason for the sharp rise in shares is the change in the DDM calculation, here is the wiki about DDM.

SOURCE: WIKI

Finally, it is possible to clearly understand the hype logic of the current investment market from the model calculation method. Draw a conclusion in the last equation.

It can be seen from this model that the present value of the shares and the shares are related, so when the dividend tax is deducted, the non-future shares calculated in the model increase, which simply increases the Target Price of the whole company. So, the dividend tax cut this time will be the most direct way to shake up the performance of higher shares.

Investment insights from the model

It is not an important question to learn how to sell, but we hope that investors will understand the definition of what is behind when stocks are higher. Institutional investors take into account that the sustainable growth rate of dividends (g) and the company's cost of ownership (r) are another important factor.

THE COST OF EQUITY WILL FALL AS RISK-FREE INTEREST RATES FALL, A KEY FACTOR DRIVING THE EARLY HIGHER YIELDS TO LEAD THE RISE. We now judge that the most important thing for a stock price movement is the expectation of a permanent growth rate in dividends.

As a result, some high-yield stocks with a stable dividend policy have overtaken the market a lot in the past year, e.g. $CHINA MOBILE(00941.HK)$ $CNOOC(00883.HK)$ $CHINA SHENHUA(01088.HK)$， $AIA(01299.HK)$It is also due to the earlier announcement of a clear dividend policy, which has led to share price movements. In addition, as a result of the national corporate reform, some companies with low dividends are also likely to begin to change significantly with the environment, e.g. $Seikitokyu Kogyo(1898.JP)$ $JIANGXI COPPER(00358.HK)$ $PETROCHINA(00857.HK)$。

How to choose a high yield stock when there is no supply

As to what investors should pay attention to when buying higher stocks at present, consumers understand that they are considering the sensitivity of higher shares and the sensitivity of the weaker economy, and the sensitivity of the country to high natural risks will follow. However, the market's view of the domestic economy began to change in April. As a result of the improvement of the economic environment, the company's earnings capacity and growth rate will increase significantly again.

Here are the different risk assessments in the high-yield stock series~

Low risk

Telecommunication Shares~ Industry Picks $CHINA MOBILE(00941.HK)$

Power Stock~ Industry Picks $CHINA RES POWER(00836.HK)$

China Risk

Top Picks for China Mainland Banking Industry $CCB(00939.HK)$

Energy Stocks Industry Highlights $PETROCHINA(00857.HK)$ $CHINA COAL(01898.HK)$

High risk

Home Insurance Industry Picks $CPIC(02601.HK)$

Cement Stock Industry Highlights $CONCH CEMENT(00914.HK)$

The above is determined by the sensitivity of the Industry and the Visitor Economy as a basic criterion. Investors need to understand the ability of personal risk underwriting to make judgments. If you want to find more about stocks with high shares, you can use the following function to find shares on Beef.

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Futu Securities senior strategy officer Hui Chihika

(The author is a licensee of the Securities and Exchange Commission and its affiliates do not have any financial interest in the proposed issuer of shares mentioned above)