The smart money's choice: Income stocks dominate, how high-yield ETFs become investors' safe haven in volatile markets

The Taiwan stock market just broke through the all-time high of 28,400 points, but the market is beginning to show signs of divergence—on one side, a frantic pursuit of AI concept stocks, and on the other, capital quietly shifting toward stable income-generating assets. What investment logic is behind this phenomenon?

Capital Speaks: Why High-Yield ETFs Are Becoming Market Focus

Looking at the Taiwan stock ETF trading rankings over the past month, a clear trend emerges. Among the most active passive Taiwan stock ETFs, high-yield products dominate— including Fubon Taiwan Select High Dividend (00919), Cathay Sustainability High Dividend (00878), Fubon Select High Dividend 30 (00900), Yuanta High Dividend (0056), and Yuanta Taiwan Value High Dividend (00940).

Among them, 00919 performs especially well. Its recent one-month increase reached 2.33%, outperforming the broader market, and more importantly, it has maintained an annualized dividend yield above 10% for 11 consecutive quarters, becoming a favorite among dividend investors. According to the latest announcement, the dividend payout for this quarter remains at NT$0.54, with the ex-dividend date set for December 16.

This is not a coincidence but a true reflection of market psychology. When the stock market is at a high level, investors automatically adjust their strategies—no longer blindly chasing gains, but shifting toward assets that offer “downside protection” and “stable cash flow.”

Lessons from the US Market: The Definition of “Quality” Companies Is Changing

The same transformation is happening in international markets. Two large US ETFs worth billions of dollars—iShares MSCI USA Quality Factor (QUAL) and Invesco S&P 500 Quality (SPHQ)—appear to have similar goals (both invest in financially sound companies), but due to key differences in stock selection logic, their holdings are vastly different.

The divergence lies in the “accrued items” indicator. SPHQ places particular emphasis on the proportion of corporate profits that are actually received as cash, rather than accounts receivable on the books. Based on this logic, the ETF has recently adjusted its holdings—reducing weights in tech giants like NVIDIA, Meta, and Microsoft.

The reasoning is solid: for example, NVIDIA’s latest quarterly report shows a surge of $16 billion in accounts receivable. This means that despite impressive revenue figures, the company needs to prepay large sums of money waiting for customer payments, putting significant pressure on cash flow.

In contrast, QUAL does not adopt this strict indicator and continues to heavily allocate to tech stocks. The result? During the AI stock surge, SPHQ temporarily led; but over the past six months, QUAL has significantly outperformed due to its focus on tech stocks.

This debate reveals a deeper issue: the hundreds of billions of dollars invested in AI—are they a gold mine for future profits or a cash-draining black hole? When companies take on debt to race for market share, can the so-called “quality halo” still remain solid?

Practical Stock Selection Strategies for High-Yield ETFs in Taiwan

Faced with the same market challenges, Taiwanese dividend stock investors have adopted a more balanced approach. Take 00919 as an example; fund manager Hsieh Ming-Chih pointed out that as valuations are already high, some smart money is diversifying from the overhyped AI tech stocks into “reasonably valued, operationally stable, and dividend-potential” value stocks—especially financial stocks.

Why are financial stocks a focus? During a rate-cut cycle, they still maintain interest rate spreads, and their dividend payout potential remains stable. This “growth stock combined with value stock” mixed allocation allows for both income pursuit and capturing spread opportunities during market rotations, creating a natural risk buffer.

The Core Logic of Investment Wisdom

BlackRock’s chief investment strategist Wei Li has publicly stated that the uncertainty brought by AI is too great. The current “burning cash first, then expecting future profits” model has yet to prove profitability. This explains why more and more capital is shifting to high-yield ETFs at market highs.

Mamdouh Medhat, research director at Dimensional Fund Advisors, offers a more straightforward view: quality investments do not need to be complicated—simply focus on companies with stable profits, reasonable valuations, and avoid excessive capital expenditure. Over the long term, these naturally generate excess returns.

Current Investment Choices

As the Taiwan stock market hits new highs, actual capital movements tell all. High-yield ETFs are becoming the most popular allocation tools in volatile markets. Whether it’s the US market’s redefinition of “quality” or Taiwanese investors’ focus on income, they point to the same logic— in an environment of rising uncertainty, the most trustworthy companies are those with strong financial health, steady cash flow, and a willingness to reward shareholders.

For investors, rather than obsessing over whether to bet on AI concept stocks, it might be more pragmatic to hold a basket of stable high-yield ETFs—participating in market growth while reducing volatility impacts. This could be a more realistic asset allocation decision in the current environment.