Goldman Sachs expects that by the end of 2025, Chinese onshore and offshore listed companies will distribute 3 trillion yuan in dividends, reaching a historical high;
Goldman Sachs believes that in a low-interest environment, the generous dividends from Chinese listed companies can attract more investors and help enhance Company Valuation.
On Sunday Eastern Time, the Goldman Sachs research team released a report titled ‘Orchestrating Returns in China's Cash Symphony’.
The report states that by the end of 2025, Chinese onshore and offshore listed companies are expected to distribute a total of 3 trillion yuan in dividends, which will reach a historic high.
Goldman Sachs also stated that the growth in dividends/share buybacks from Chinese listed companies in the current low-interest environment will attract more investors, and Company Valuation is also expected to rise.
The scale of dividends from Chinese listed companies is expected to reach a new high.
Goldman Sachs stated that in 2024, over 4,300 Chinese companies listed in mainland China, Hong Kong, and the United States collectively distributed 2.7 trillion yuan in dividends. This year, Goldman Sachs forecasts that the scale of dividends from Chinese listed companies will grow by 10% to 3 trillion yuan compared to last year.
The increase in dividend scale from Chinese listed companies is largely due to national policy guidelines encouraging companies to distribute dividends multiple times to boost investor confidence. In April 2024, the State Council released a new 'National Nine Articles' for Capital Markets, namely 'Several Opinions on Strengthening Regulation to Prevent Risks and Promote High-Quality Development of Capital Markets,' to enhance regulation on cash dividends from listed companies. This guideline states that for companies that have not paid dividends for many years or have low payout ratios, restrictions on large Shareholder Shareholding will be placed, along with risk warnings; incentives for high-quality dividend-paying companies will be increased, using multiple measures to promote higher dividend rates.
Goldman Sachs wrote in the report:
Under the strong policy push from the new 'Nine National Policies' released in April 2024, along with strong cash flow and substantial cash reserves, Chinese listed companies provided unprecedented cash returns to shareholders in 2024.
Looking ahead, we expect that by 2025, the total amount of dividends/repurchase will reach 3 trillion yuan/0.6 trillion yuan (a year-on-year increase of 10%/35%), although different financial characteristics will affect the choice of the method of return.
Goldman Sachs stated that driven by the new 'Nine National Policies,' more than 200 companies have declared dividends for the first time since 2020, and 1,080 companies listed in Mainland China declared interim or special dividends in 2024.
Goldman Sachs also stated that the dividend payout ratio of Chinese listed companies reached 39% last year, higher than 37% in 2023 and above the average level of 31% over the past decade.
Goldman Sachs noted that in traditional industries or industries dominated by state-owned enterprises such as finance, energy, telecommunications, and utilities, companies are more inclined to use dividends as the main way to return capital to shareholders.
Currently, the yield on China's 10-year government bonds has fallen to a record low of 1.64%. Goldman Sachs wrote in the report: 'The generous dividends of listed companies can attract more investors and are seen as a way to obtain higher returns than bonds in a low-interest-rate environment.'
Goldman Sachs also pointed out in the report that dividends and repurchases will significantly contribute to enhancing company valuation. Analysts wrote in the report:
On average, if listed companies allocate 10% of total cash outflows to dividends or repurchases, it will help improve company valuation by 14%.
The report adds that if the dividend payout ratio of Chinese listed companies reaches the average level of Asia and Europe, the valuation of mainland China's listed Stocks may increase by 15% to 25% in the next 10 years.
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