High Dividend Yield Screen on Hong Kong Stocks: 7.93% CAGR (HKSE Backtest)
We backtested a high dividend yield screen with quality filters on Hong Kong stocks (HKSE) from 2000-2025. 7.93% CAGR with +6.29% annual alpha over the Hang Seng, the strongest outperformance of any exchange tested.
We ran the same high dividend yield quality screen on Hong Kong stocks (HKSE) from 2000 to 2025. The result: 7.93% CAGR with +6.29% annual alpha over the Hang Seng. That's the strongest outperformance of any exchange we tested. Hong Kong's dividend market is deep (22.7 avg stocks) and the strategy delivered a +45.3% return in 2024, its best single year.
Contents
- Method
- Results
- Annual Returns
- When It Works
- When It Struggles
- Hong Kong's Dividend Culture
- Limitations
- Part of a Series
- References
Data: FMP financial data warehouse, 2000–2025. Updated March 2026.
Method
Data source: Ceta Research (FMP financial data) Universe: HKSE-listed stocks with market cap > 2B HKD (~$256M USD) Period: 2000-2025 (25 years) Rebalancing: Annual (July)
Same signal as the US analysis: dividend yield 4-15%, payout 0-80%, FCF > 0, ROE > 8%, D/E < 2.0. Top 30 by yield, equal weight.
Results
| Metric | Strategy | Hang Seng |
|---|---|---|
| CAGR | 7.93% | 1.64% |
| Total Return | 573% | -- |
| Max Drawdown | -36.94% | -- |
| Sharpe Ratio | 0.254 | -- |
| Sortino Ratio | 0.527 | -- |
| Calmar Ratio | 0.215 | -- |
| Win Rate (vs Hang Seng) | 72% | -- |
| Up Capture | 126.2% | -- |
| Down Capture | 34.2% | -- |
| Beta | 0.862 | -- |
| Alpha | 6.10% | -- |
| Cash Periods | 3/25 (12%) | -- |
| Avg Stocks | 22.7 | -- |
The strategy crushed the Hang Seng over 25 years, beating it in 72% of years. The quality filters did the heavy lifting: 6.10% alpha, low down capture (34.2%), and up capture above 100% means the portfolio captured more upside and far less downside than the index.
Annual Returns
| Year | Strategy | Hang Seng | Excess |
|---|---|---|---|
| 2002 | +9.5% | -8.5% | +18.0% |
| 2003 | +29.4% | +27.3% | +2.1% |
| 2005 | +7.3% | +15.2% | -7.9% |
| 2006 | +50.3% | +35.7% | +14.6% |
| 2007 | -22.1% | -2.0% | -20.1% |
| 2008 | -19.0% | -16.2% | -2.8% |
| 2009 | +17.8% | +9.5% | +8.3% |
| 2010 | +20.7% | +14.4% | +6.3% |
| 2011 | -13.2% | -13.3% | +0.1% |
| 2012 | +22.7% | +4.7% | +18.0% |
| 2013 | +22.2% | +14.0% | +8.2% |
| 2014 | +24.7% | +11.6% | +13.1% |
| 2015 | -10.9% | -19.9% | +9.0% |
| 2016 | +18.5% | +22.4% | -3.9% |
| 2017 | +18.5% | +10.7% | +7.8% |
| 2018 | -9.8% | +1.2% | -10.9% |
| 2019 | -14.2% | -13.0% | -1.2% |
| 2020 | +24.5% | +12.7% | +11.8% |
| 2021 | -8.0% | -22.9% | +14.8% |
| 2022 | +1.3% | -11.6% | +12.9% |
| 2023 | +24.0% | -8.0% | +31.9% |
| 2024 | +45.3% | +36.3% | +9.0% |
When It Works
2006: +50.3%, a massive year driven by pre-GFC China optimism flowing into Hong Kong dividend stocks. Beat the Hang Seng by 14.6 points.
2012-2014: Three consecutive years of strong outperformance, averaging +13 points of excess return. Shanghai-Hong Kong Stock Connect launched in 2014, boosting mainland interest in HK dividend stocks.
2021-2023: While the Hang Seng collapsed (cumulative -42%), the strategy held up far better with quality filters keeping the worst names out. The +31.9% excess in 2023 was the best single-year outperformance.
2024: +45.3%, the standout. Hong Kong valuations hit multi-decade lows in 2022-2023, and quality dividend payers rebounded sharply as sentiment improved.
When It Struggles
2007: -22.1% while the Hang Seng only lost -2.0%. The global financial crisis hit dividend-heavy sectors first, and the quality filters didn't protect against the initial shock.
2018-2019: Combined -24.0%. US-China trade tensions, Hong Kong protests, and COVID fears weighed heavily on HK-listed dividend payers.
Hong Kong's Dividend Culture
Hong Kong has a deep dividend-paying tradition, especially among property developers, utilities, and conglomerates. Many HKSE-listed companies are controlled by founding families who value consistent dividends. This makes the 4-15% yield range well-suited to the market, with 22.7 qualifying stocks on average.
The market also includes Chinese state-owned enterprises (SOEs) listed in Hong Kong ("H-shares") that often pay high dividends. These add both yield and China macro risk to the portfolio.
Limitations
China exposure: Many HKSE-listed companies derive revenue from mainland China. China economic slowdowns and regulatory actions affect returns disproportionately.
Currency: HKD is pegged to USD, so currency risk is minimal compared to other international markets. But mainland-revenue companies face CNY/HKD translation effects.
Liquidity: Some Hong Kong mid-caps have thin trading volumes. Our $256M market cap floor helps, but bid-ask spreads may be wider than US equivalents.
Data: Ceta Research (FMP financial data warehouse). Universe: HKSE, market cap > 2B HKD. Backtest: 2000-2025, annual July rebalance. Past performance does not guarantee future results.
Part of a Series
This is the Hong Kong analysis. See also: - High Yield Quality on US Stocks - 12.08% CAGR, full methodology - High Yield Quality Across 12 Global Exchanges - full comparison
References
- Fama, E. & French, K. (1998). "Value versus Growth: The International Evidence." Journal of Finance, 53(6), 1975-1999.
