Dividend-rich stocks are China’s market-beating weapon for funds seeking shelter from Shanghai market turbulence

Picking companies that pay generous dividends has become the most rewarding strategy in Shanghai’s stock market this year, shielding investors from steep losses caused by weeks of citywide lockdowns until its reopening this week.

The Shanghai Stock Exchange Dividend Index has gained 1.3 per cent so far this year through June 2, the only major gauge to beat a market awash with losses, according to Bloomberg data. Including reinvested dividends, the 50-member gauge returned 2.3 per cent, versus a 12 per cent slump in the benchmark Composite Index.

If the trend is sustained, the dividend index will outperform the broader Shanghai market of 1,860 stocks for a second year running.

Maanshan Iron and Steel is the most attractive member, with a payout amounting to 18 per cent of its stock price, according to Bloomberg data. The stock has risen 9.8 per cent this year to 4.05 yuan. China Petroleum and Chemical Corp came close with a 14 per cent yield. Shares of Sinopec, as the firm is known, have gained 4.5 per cent.

The focus on these old-economy stalwarts is not surprising as new-economy juggernauts like Alibaba Group Holding, Tencent Holdings and Meituan stumbled under a year-long regulatory crackdown. Cracks in the economy, provoked by China’s stringent anti-Covid curbs, have also wreaked havoc and raised the spectre of recessions.