4% Dividend Yield Valuation Rule for A-Share Utilities: Applicability Analysis and Framework Reconstruction

Based on current market data [0] and the latest interest rate environment analysis [1], I will systematically address this valuation methodology question.

According to the latest market data, China’s 10-year government bond yield is currently in a historical low range of around

, and some institutions predict it may further decline to a historical new low of in 2026 [1]. This interest rate environment is driven by the following factors:

• Uneven economic recovery and weak consumption
• Persistent pressure on the real estate market
• Persistent deflationary pressure
• Expectations of loose monetary policy from the central bank

The “4% Rule” uses the

. It argues that when the dividend yield reaches 4%, the stock provides a risk premium of approximately relative to risk-free assets (4% - 1.7% = 2.3%), which is sufficient to compensate for the additional risk of stocks.

4% is not a fixed value but a . Its essential formula is:

Critical Dividend Yield = Risk-Free Rate + Equity Risk Premium

In the current environment: 1.7% + 2.3% ≈4%

• Current Price
  : 100.84 CNY
• Dividend Yield
  : ~6.33%
• P/E Ratio
  :11.08x
• P/B Ratio
  :1.05x
• ROE
  :10.27%
• YTD Performance
  : -12.31%

China Mobile’s current dividend yield (6.33%) is than the 4% critical line, providing a risk premium of approximately 4.6 percentage points (6.33% -1.7%).

• ✅
  Generous Dividend Yield
  :6.33% far exceeds government bond returns
• ✅
  High Dividend Stability
  :Adequate cash flow and stable dividend payout ratio
• ✅
  Valuation in Reasonable Range
  :P/B close to 1x, limited downside potential
• ⚠️
  Slowing Growth Expectations
  :The communication industry has entered a mature stage, and capital expenditure pressure remains

• ⚠️
  Weak Stock Price Performance
  :12.31% YTD decline reflects market concerns about growth
• ⚠️
  Long Payback Period for 5G Investment
  :Capital expenditure will continue to suppress free cash flow
• ✅
  Digital Transformation Opportunities
  :Cloud computing and data center businesses have growth potential

. A 6.33% dividend yield plus a1.05x P/B ratio provides sufficient safety margin, suitable for allocation by Type A investors; Type B investors need to wait for signs of a bottom in the5G investment cycle.

• Current Price
  :8.82 CNY
• Estimated Dividend Yield
  :~4.5%
• P/E Ratio
  :8.38x
• P/B Ratio
  :1.16x
• ROE
  :14.63%
• YTD Performance
  :+14.69%

Wanneng Power’s current dividend yield is approximately4.5%, than the4% critical line, with a risk premium of about2.8 percentage points.

• ✅
  Regulatory Protection Attribute
  :The power industry has quasi-public utility attributes and relatively stable returns
• ✅
  High ROE Feature
  :14.63% ROE indicates good capital return capability
• ⚠️
  Coal Price Volatility Risk
  :Fuel costs account for a large proportion, and profitability is affected by coal prices
• ✅
  Valuation Repair
  :14.69% YTD increase reflects market pursuit of high-dividend assets

. The4.5% dividend yield provides a moderate safety margin, but attention should be paid to the impact of coal price volatility on dividend stability.

• Current Price
  :5.78 CNY
• Estimated Dividend Yield
  :~3.8%
• P/E Ratio
  :13.90x
• P/B Ratio
  :1.68x
• ROE
  :12.72%
• YTD Performance
  :+30.47%

Guodian Power’s current dividend yield is approximately3.8%, than the4% critical line, but its YTD stock price increase of30.47% significantly outperforms the market.

• ⚠️
  Dividend Yield Not Meeting Standard
  :3.8% below the4% rule’s critical point
• ✅
  Growth Premium
  :Renewable energy transformation brings growth expectations
• ✅
  Valuation Upgrade
  :13.90x P/E reflects market recognition of its transformation prospects
• ⚠️
  Dividend Sustainability
  :Large-scale new energy investments may squeeze the dividend payout ratio

. Although the dividend yield is slightly below4%, the market gives a growth premium, making it more suitable for Type B investors.

• Mature Utility Stocks
  :Stable business, predictable cash flow, high dividend payout ratio
• Interest Rate Downward Cycle
  :Declining government bond yields enhance the relative attractiveness of dividend yields
• Defensive Allocation Needs
  :High-dividend assets have safe-haven value when market volatility increases

###3.2 Inapplicable Scenarios (❌)

• High Growth Stage
  :For example, power companies in the new energy transformation period need DCF valuation instead of dividend yield method
• Cyclical Volatility Industries
  :Profit fluctuations lead to unstable dividends
• Aggressively Expanding Enterprises
  :Low dividend payout ratio, stock price driven by capital appreciation rather than dividends

###4.1 Recommended Valuation Matrix

Dividend Yield Range	Valuation Status	Investment Advice	Applicable Investors
<3.0%	Significantly Overvalued	Avoid/Reduce Position	-
3.0%-4.0%	Reasonably High	Cautiously Hold	Type B Investors
4.0%-5.0%	Reasonable Range	Batch Allocation	Type A + Type B Investors
5.0%-6.5%	Undervalued Zone	Actively Buy	Mainly Type A Investors
>6.5%	Deeply Undervalued	Heavy Position Opportunity	Type A Investors

###4.2 Dynamic Adjustment Factors

• Further decline in government bond yields (e.g., to1.5%)
• Decline in market risk appetite
• Increased expectations of economic recession

• Accelerated economic recovery
• Rising inflationary pressure
• Rebound in risk-free interest rates

###5.1 Type A Investors (Pursuing Stable Income)

: Dividend Yield>4.5% + P/B<1.2 + Dividend Stability

:

1. China Mobile
   :6.33% dividend yield, sufficient safety margin, as core position
2. Wanneng Power
   :4.5% dividend yield, moderate allocation, pay attention to coal price risk

: Gradually build positions when dividend yield ≥4.5%

###5.2 Type B Investors (Pursuing Growth Income)

: Industry Transformation Potential + Valuation Upgrade Space + Dividend Stability

:

1. Guodian Power
   :New energy transformation leader, but need to wait for correction opportunities
2. Power ETF
   :Diversified allocation to reduce individual stock risk

: When valuation corrects to P/E<12x or dividend yield>4%

1. Interest Rate Risk
   :If the 10-year government bond yield rebounds above 2.5%, the 4% rule needs to be adjusted upward to4.8%
2. Policy Risk
   :Electricity price regulation, changes in industry regulatory policies
3. Dividend Sustainability
   :Need to pay attention to enterprises’ free cash flow and capital expenditure plans
4. Industry Transformation Risk
   :Huge new energy investment scale may affect short-term dividend capacity

, but it needs to be dynamically adjusted based on the following factors:

1. Interest Rate Anchor
   :Based on the 10-year government bond yield (current1.7%)
2. Risk Premium
   :Maintain an equity risk premium of2-3 percentage points
3. Industry Characteristics
   :Distinguish between communication services (stable type) and power (cyclical + growth type)
4. Investor Type
   :Type A focuses on dividend yield, Type B balances growth

In the current low-interest rate environment, a dividend yield of

is a reasonable valuation range for A-share utilities, and enters the undervalued zone with significant allocation value.

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[0] Jinling API Data - Real-time stock prices, financial indicators, historical price data (2025)
[1] Bloomberg - “China Bond Yields May Fall Back Toward Record, HSBC Asset Says” (https://www.bloomberg.com/news/articles/2025-12-02/china-bond-yields-may-fall-back-toward-record-hsbc-asset-says)
[2] Bloomberg - “China Bond Yield Forecast: SocGen Sees Record Lows After Interest Rate Cuts” (https://www.bloomberg.com/news/articles/2025-12-11/china-bond-yield-forecast-soc-gen-sees-record-lows-after-interest-rate-cuts)
[3] Yahoo Finance Hong Kong - China Mobile dividend yield data (https://hk.finance.yahoo.com/quote/0941.HK/)