In today’s low-interest-rate era, traditional banking deposits remain an essential financial management strategy for ordinary citizensDespite the prevailing low returns, keeping a portion of one’s savings in the bank is crucial for financial stability and future planningCurrently, state-owned banks and joint-stock banks are actively lowering their deposit rates, with smaller banks following suitFor instance, Jiangsu Bank, which previously garnered attention for its attractive interest rates, has seen its rates drop significantly: one-year deposits now yield 1.45%, while longer-term deposits (two, three, and five years) have fallen to rates between 1.65% and 1.95%. Such drastic reductions lead to a scenario where savings seem less rewarding, entering a new phase in the realm of personal finance.

Nonetheless, maintaining a habit of saving is an essential aspect of personal financial managementDeposits serve multiple roles: they safeguard money for emergencies, enhance financial security, prepare individuals for future investment opportunities, contribute to retirement planning, assist with significant expenditures, facilitate debt repayment, and can even pave the way to financial freedomEssentially, saving money is about strategic planning for the future, enhancing individual financial stability and life quality.

While it is true that deposits generate interest, the current climate of dropping interest rates necessitates exorbitant initial investments to achieve significant financial returnsFor example, the three-year deposit rate has plummeted from 4.18% three years ago to just 2.4% todayWhat this means is that if one originally invested one million yuan, the annual interest accrued would now shrink from 41,800 yuan to a mere 24,000 yuanTo recoup the same income of 41,800 yuan, the principal would need to increase significantly to approximately 1.74 million yuanThis stark reality serves as a wake-up call for individuals relying solely on traditional banking methods for wealth accumulation.

With no increase in principal, those still seeking the same level of asset income are compelled to explore higher-yield investment products, albeit with the associated risk of short-term losses

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Products such as bank R2-rated wealth management products or pure bond funds, which historically yield between 3.5% and 4%, are considered viable alternatives but come with their own set of risks and variablesHence, while the path of traditional savings appears limited, looking towards wealth management as a solution might be preferable, as long as one carefully balances risks against potential returns and avoids the temptation of chasing after high yields without considering the underlying risks.

Furthermore, high-dividend stocks are gaining traction as a significant avenue for generating passive incomeDividends are accounted for as property income, while capital gains can enhance investment principalBy reinvesting dividends, investors can benefit from compound interest, amplifying their earning potential over timeTake, for instance, the case of the Bank of ChinaAn initial investment of 100,000 yuan at 2.73 yuan per share in 2014 resulted in acquiring 36,600 sharesThrough the decade-long practice of reinvesting dividends, the total number of shares held increased to 67,700, effectively tripling the initial investment value to approximately 319,500 yuan by 2024—a staggering increase of 219.5%.

Yet, selecting the right high-dividend stocks is paramountTrue high-yield stocks are characterized by stable performance, sustainable dividends, and consistently high dividend yields, as opposed to stocks that might only offer a high payout occasionallyIn the instance of Bank of China, its dividend has increased consistently over the last ten years, from a disbursement of 1.96 yuan per 10 shares in 2013 to 2.364 yuan in 2023. This kind of sustained growth is a hallmark of quality investments.

High-dividend stocks predominantly come from robust industries such as banking, oil, power, coal, and transportationMajor state-owned banks such as Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China are favored for their steady dividend payments

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Likewise, oil giants like PetroChina and Sinopec exhibit excellent dividend payment capabilitiesFor example, Sinopec has maintained a commendable dividend rate of around 6.2% on the A-share market since 2016, reflecting its robust financial health.

Moreover, various other sectors feature companies with stable performances that consistently grow their dividendsIn the hydropower sector, enterprises like China Yangtze Power and Huaneng Hydropower stand out for their robust financial returnsLikewise, in the coal industry, China Shenhua, Shanxi Coal, and Yanzhou Coal are popular choices for dividend investorsThe transportation sector, represented by companies like Daqin Railway, consistently offers a dividend yield exceeding 6%, ensuring that investors are rewarded generously.

For investors who may not feel comfortable choosing individual high-dividend stocks, dividend-oriented mutual funds present another excellent alternativeThese funds primarily focus on securities that demonstrate high dividend yields, strong returns on equity (ROE), low valuations, and large market capitalizations—attributes that facilitate effective pairing with higher-risk growth assets in a well-balanced portfolio strategyAccording to Huaxia Fund, the summarization of essential insights for investing in dividend assets emphasizes the importance of immediate returns, certainty, and the need for stable dividend payouts and cash flowsHerein, the “dividend yield” emerges as one of the crucial pricing frameworks for evaluating these assets.

Additionally, regulatory policies are increasingly supportive of corporate dividend payments, ensuring that the logic behind investing in dividend-focused strategies continues to hold strongThe recent implementation of new guidelines has clarified that sectors producing high and stable dividends align well with the long-term investment philosophy, potentially driving a shift towards mid-to-long-term investment logicConsequently, investments in dividends are gaining traction, as evidenced by the substantial activity in exchange-traded funds (ETFs) that have also opted for dividend distributions

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