2 Top China Dividend Stocks to Buy in a Bear Market

What is Dividend

Tim Phillips

August 30, 2022

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Investors in China have had a wretched 2022. The benchmark Hang Seng Index in Hong Kong has fallen 14% so far in 2022 after having fallen by nearly 15% in 2021.

However, that was mainly down the large falls in China technology stocks as the likes of Alibaba Group Holding Ltd (SEHK: 9988) (NYSE: BABA) and Tencent Holdings Ltd (SEHK: 700) were battered.

That was on the back of a crackdown on China’s technology giants by the government. Elsewhere, a “Zero-Covid” policy that China’s government insists on sticking to also hasn’t helped the economy.

Yet, in times like these, there will always be companies that provide regular income to investors. These stocks can be bought in both good times and bad because they provide crucial services.

So, here are two China dividend stocks that investors can buy and hold in any bear market.

1. CLP Group

One of the Hang Seng Index’s utilities constituents is CLP Group (SEHK: 2). It traces its roots back to 1901, when it was known as “China Light & Power”.

It’s an electricity provider for Hong Kong homes but also has power assets in Australia, Mainland China and India. This stable business allows it to pay dividends four times per year.

In the first half of 2022, CLP saw revenue rise 17% year-on-year to HK$47.6 billion (US$6 billion). However, a fair value loss of around HK$8 billion on energy hedging contracts in Australia meant that the company saw a net loss o HK$4.85 billion during the period.

The company, which serves over 2.7 million customers in Hong Kong, actually saw operating earnings from its local operations increase 5.1% year-on-year to HK$4.2 billion.

Meanwhile, its Mainland China assets also saw solid performance on its higher zero-emission portfolio. CLP’s operating earnings from Mainland China soared 28.9% year-on-year in the first half 2022 to HK$1.24 billion (see below).

CLP Mainland China H1 2022 earnings

Source: CLP Holdings H1 2022 earnings presentation

As it looks to decarbonise its operations, CLP is investing more as well. In the first half of 2022, the company saw its capital investments rise by 29% year-on-year to HK$7.6 billion.

CLP’s dividend is also solid as the company maintained its HK$0.63 dividend per share (DPS) in the latest quarter.

It’s also important for investors in Singapore to remember that Hong Kong – like the Lion City – does not impose a tax on dividend payments.

With a full-year 2021 DPS of HK$3.10, CLP shares give investors a dividend yield of 4.6%.

2. HKT Trust

In times of uncertainty, investors need to be invested in companies that people cannot live without – HKT Trust and HKT Ltd (SEHK: 6823) is one such firm.

The company is a telecommunications firm that provides fixed line, broadband, mobile, and media entertainment services to the Hong Kong public.

HKT Trust recently released its H1 2022 earnings (for the six months ending 30 June 2022). It had a solid showing, despite Hong Kong’s economy being buffeted by Covid-19 restrictions.

The company saw H1 2022 revenue rise 3.3% year-on-year to US$2.07 billion. Meanwhile, its total EBITDA for the period rose 2.1% year-on-year to US$748 million.

Encouragingly, even though Hong Kong has a high penetration rate for mobile subscribers, HKT Trust is managing to grow its customer base.

In the first half of the year, HKT Trust saw its total post-paid customer base (among its multiple brands) rise 1% year-on-year to 3.31 million.

It also saw its mobile services revenue increase to US$468 million in H1 2022 (see below).

HKT Trust H1 2022 mobile subscribers

Source: HKT Trust H1 2022 earnings presentation

Furthermore, the company continues to grow its 5G customer base. It hit 918,000 in July of 2022, with HKT Trust forecasting a 5G penetration rate of only 30% by the end of this year.

That gives HKT Trust more upside to average revenue per user (ARPU) as 5G services reach more people.

The company was also the first mobile operator in the city to provide full 5G coverage along all MRT lines.

With its stable earning profile, HKT Trust management has managed to raise its dividend. Its interim dividend per share (DPS) was 31.36 HK cents. That was up from 30.70 HK cents in H1 2021.

The telco paid out a 2021 final DPS of 42.07 HK cents in FY2021. That means it has a trailing 12-month payout of 73.43 HK cents.

Currently, HKT Trust shares are yielding an attractive 7% based on its share price of HK$10.46.

Stability amid volatility

For investors in Singapore looking for dividends, there will always be ideas outside of the local market.

That’s because dividend investors should aim to build up a portfolio of resilient (and global) income-paying businesses.

In Hong Kong – which has a zero-rate dividend tax – both CLP Holding and HKT Trust can provide a level of stable yield in the face of uncertainty.

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.

About the Author: Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer. In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.