High Dividend Stock Investment
A Guide for Beginners: High-Yield Stock Screening Strategies
Want to increase passive income and achieve financial freedom without watching the market daily? Dividend stocks are one of the best options!
Choosing dividend stocks is like having quality companies work for you, with dividends received annually, making profits extremely reassuring. Of course, selecting high-yield stocks should not be done blindly; beginners can refer to the following key principles to establish a watchlist.
Four Key Techniques for Identifying Dividend Stocks
1. Select High-Yield Industries
Common high-yield industries include utilities (water, electricity, gas), banking, insurance, certain mature consumer goods, energy, telecommunications, and more.
These industries typically have stable operations and abundant cash flow, making them more suitable for returning high dividends to shareholders.
The Futubull Classroom has compiled a list of relevant industries for fellow investors to bookmark and study!
Industry | Core Features | Advantages | Disadvantages | Representative Hong Kong Stock Cases (as of August 2025 data) |
Banking Sector | Core of the financial system, relatively stable dividends | Higher dividend yield, strong liquidity, significant policy support | Subject to economic cycles, potential risk of bad debts, and profit growth may slow | $BOC HONG KONG(02388.HK)$ $HSBC HOLDINGS(00005.HK)$ $HANG SENG BANK(00011.HK)$ |
) Energy Industry | With abundant cash flow, the leading companies maintain a solid position. | The scale of dividends is large, benefiting from the upward adjustment of oil prices, with a considerable dividend yield. | The industry is cyclical, highly affected by oil price fluctuations, and faces challenges in transformation and upgrading. | $CNOOC(00883.HK)$ $PETROCHINA(00857.HK)$ $CHINA SHENHUA(01088.HK)$ |
Telecommunications Industry | Stable revenue, strong cash flow | Substantial dividend payouts, inelastic demand, strong defensive position | Capital expenditures may be significant, rapid technological upgrades | |
Public Utilities | Operating concessions, inelastic demand | Stable earnings, strong defensiveness, high predictability of cash flow | Limited growth potential, heavily influenced by regulatory policies, sensitivity to interest rate changes may affect its attractiveness | |
REITs and Real Estate | Primarily based on rental income, with a relatively stable dividend policy. | Attractive dividend yield, benefiting from property appreciation. | Subject to the real estate market cycle; changes in interest rates may affect financing costs and the attractiveness of high yields. | |
The insurance industry | Redefined as an 'alternative dividend asset' | Certain companies offer attractive dividend yields and benefit from changes in the interest rate environment. | The capital market is significantly affected by fluctuations, and regulatory policy changes may impact profitability models. | |
Consumer Industry | Strong cash flow, with significant brand advantages. | Stable dividends and strong business resilience against economic cycles. | Intense market competition, potentially affecting consumer confidence due to economic slowdown. | |
Source: Organized by Futubull Classroom; the stocks mentioned in the diagram are for educational purposes only and do not constitute investment recommendations. | ||||
2. Key Indicators
After understanding the high dividend yield industry, we can preliminarily filter the observation list based on key indicators that affect dividend yield.
Dividend Yield = (Dividend per Share / Share Price) * 100%. A company’s net profit, cash flow, and dividend payout ratio can all affect the size of the dividend yield. Typically, only companies that consistently make profits will continue to distribute dividends. Choosing companies with a dividend yield above 4% is more favorable for investors seeking long-term stable returns.
Select companies that have a long-term and stable dividend history, for example, those that have paid dividends annually for the past 5 years, 10 years, or even longer, with stable or continuously increasing dividend amounts.
Dividend Payout Ratio = (Dividend per Share / Earnings per Share) * 100%. The payout ratio represents the proportion of earnings that a company distributes to its shareholders.
Of course, a higher payout ratio is not always better. If the payout ratio exceeds 80%, it indicates that the company retains less for reinvestment, which may limit its growth potential; conversely, if the payout ratio is too low, such as below 30%, it may suggest a lack of confidence in future cash flows.
3. Observe the Company's Fundamentals
After initial screening, we need to conduct an in-depth analysis of the company's fundamentals to ensure that high dividends are sustainable. We can focus on the following two aspects:
Distributing dividends requires real cash; the more a company earns and the more abundant its cash flow, the greater its ability to distribute dividends.
We can observe the company's ROE and operating cash flow; typically, a sustained high ROE above 15% indicates that the company has a competitive advantage, while stable operating cash flow represents a fundamental guarantee of the company's dividend sources.
Companies with excessive debt may halt dividend payments during economic downturns in order to repay debts, so we need to examine the company's debt situation.
First, pay attention to the debt-to-asset ratio. When compared to peers, a high debt-to-asset ratio indicates greater risk, necessitating cautious selection.
Secondly, monitor the interest coverage ratio, which is calculated as earnings before interest and taxes divided by interest expenses. A higher ratio indicates that the company can comfortably pay interest, reflecting greater financial safety.
4. Avoiding Dividend Traps
One situation is that some companies experience a sharp decline in stock prices while the dividend amount remains unchanged, leading to an illusion of an abnormal surge in dividend yield.
Another scenario is that some companies may suddenly distribute a large dividend that greatly exceeds their net profit, resulting in an exceptionally high dividend yield for that year. Due to this one-time factor being unsustainable, the company's dividend yield may subsequently revert to a mediocre level.
For cyclical industries, profits are higher during economic upturns, which may lead to high dividend yields; however, during economic downturns, the net profits of such companies may also decline significantly or even result in losses, causing a substantial drop in dividend yields. Therefore, the volatility of their dividend yields is considerable, and high dividend yields are not sustainable. Thus, when screening for high-dividend stocks, it is important to be cautious of industries at the peak of the cycle to avoid pitfalls.
High-Dividend Stock ETFs Are Also Worth Attention
Of course, in addition to high-dividend stocks, high-dividend ETFs are also a good choice, such as the common Hong Kong high-dividend ETF: Fubon CSI 300 High Dividend ETF (3190.HK). How should we select them? We can refer to the following criteria:
Understand the index tracked by the ETF, check its constituent stocks and industry distribution to avoid excessive concentration. At the same time, pay attention to whether the index has requirements for dividend continuity (e.g., requiring dividends for three consecutive years) and dividend payout ratio (to avoid companies with abnormal dividends or those unable to sustain dividends).
The dividend yield is a core indicator, and typically, ETFs with a dividend yield above 4% should be given special attention; however, it is essential to consider its sustainability to avoid dividend traps. Additionally, pay attention to the overall valuation level of the index (such as the price-to-earnings ratio), as lower valuations generally indicate a higher margin of safety.
Focus on the expense ratio, which includes management fees and custody fees, as these costs directly erode actual returns; generally, a lower expense ratio is preferable.
Key time points for income collection strategies
Important timeline: Dividend declaration → Ex-dividend date → Record date → Payment date; these key dates must be remembered.
Declaration date: The date when the company's board of directors announces the dividend plan, pay attention to the amount of dividend per share and any changes in the dividend policy.
Ex-dividend date: The most critical day, determining which shareholders are eligible to receive dividends. Investors must buy and hold shares before the ex-dividend date (including the previous trading day) to qualify for the upcoming dividend. Purchases made on or after the ex-dividend date will not receive the dividend. Share prices typically undergo an adjustment on the ex-dividend date (decline) by an amount roughly equal to the dividend per share.
Registration Date: The date on which the company finalizes the list of eligible shareholders, typically within one to two trading days following the ex-dividend date. The company will determine the shareholder register on this date, and only shareholders listed will be entitled to receive dividends. As a regular investor, your primary focus should be on the ex-dividend date.
Payment Date: The official date on which the company distributes dividends to eligible shareholders. Funds are usually credited to your securities account on the payment date or within 1-3 business days thereafter.
Q&A
Q: If I sell the stock on the ex-dividend date, can I still receive the dividend?
A: Yes, you can still receive the dividend. As long as you hold the stock on the ex-dividend date or prior to it, you will be eligible for this dividend even if you sell the stock on the ex-dividend date.
Q: Where can I find the detailed dividend schedule?
A: You can find the detailed dividend schedule for the target stock on the "Stock Page" of the Futubull App -> "Company Information" -> "Corporate Actions", allowing you to easily track the progress.
Q: Do I need to pay dividend tax when purchasing high-dividend Hong Kong stocks or ETFs?
A: Some listed companies will charge dividend tax, which is subject to the company’s announcement; it is usually deducted from the distribution amount, resulting in a post-tax amount after the dividend is credited.
Dividends received from investing in H-shares (companies listed in mainland China) are subject to a 10% 'dividend tax'; dividends from non-H shares (companies registered outside China) are exempt from tax withholding.
Q: Besides dividend tax, what other fees might be incurred from dividend distribution?
A: ① Cash Dividend
Registration and transfer fees: HKD 1.5 per board lot (for less than one board lot, charged as one board lot);
Dividend service fee: 0.2% of the total cash dividends; if the dividend amount minus registration and transfer fees exceeds HKD 60, a minimum fee of HKD 30 will be charged each time;
Bonus Shares
Futu charges a fee of HKD 1 per lot for depositing stocks into clients' securities accounts, with a minimum fee of HKD 30 and a maximum fee of HKD 200;
Registration and transfer fee: HKD 1.5 per lot;
