Chinese Firms Boost Dividends Amid Governance Reforms

Chinese firms are drawing investors with higher dividends and buybacks, driven by corporate governance reforms. This trend is aligned with Beijing's push to boost investments in domestic stocks. Record cash dividends and share buybacks underscore the investors' attraction to China's market, despite valuations below historical averages.

Chinese companies are increasingly appealing to investors by raising dividends and buybacks, a move strongly influenced by ongoing corporate governance reforms encouraged by Beijing. These initiatives align with the government's call for enhanced investments in domestic equities, compelling firms to enhance shareholder returns.

Data from LSEG reveals that China's dividend yield reached 2.8% at the close of 2024, marking its highest point in eight years. The total cash dividends from over 2,000 large and mid-cap companies surged to an unprecedented 3.4 trillion yuan ($468.84 billion) in 2023, with further growth projected over the coming years.

The preference for Chinese stocks continues despite their valuation trailing behind historical norms. As of recent estimates, Chinese stocks trade at about 13 times forward earnings, compared to Japan and the S&P 500. Over 40 Chinese firms boast a price-to-earnings ratio below their dividend yield, offering lucrative opportunities for discerning investors.

(With inputs from agencies.)