Group 1: Allocation Demand in Low-Interest Rate Environment - The demand for dividend-related assets is expected to continue increasing, driven by the need for stable cash returns in a low-interest rate and asset scarcity environment [4][9]. - As of December 17, 2025, the tracking scale of dividend index ETFs approached 200 billion, while cash flow-related products reached 24.8 billion since their issuance in February of the same year [9]. Group 2: Comparison of Dividend and Free Cash Flow Indices - The report outlines the selection rules for the CSI Dividend Index and the National Index Free Cash Flow, emphasizing liquidity and consistent dividend payments over the past three years [12]. - The performance comparison shows that both dividend and cash flow indices outperformed the overall market during periods of market downturns, indicating their defensive characteristics [15]. Group 3: Relationship Between Dividend Capability and Willingness - There is a significant positive correlation between dividend yield and free cash flow, indicating that companies with high cash flow are more willing to distribute dividends [51]. - The analysis shows that companies with a history of consistent dividends and strong cash flow tend to have more stable and superior long-term stock price performance [59]. Group 4: "High-Yield Cash Cow" Strategy Construction - The "High-Yield Cash Cow" strategy involves selecting stocks based on high free cash flow rates and consistent dividend payments, excluding financial and real estate sectors [59]. - The strategy has shown strong performance, with the "Cash Cow 50 High Yield 30" combination achieving an annualized return of 25.9% since 2014, outperforming the CSI Dividend Index by 13.5% [62].

Report Industry Investment Rating No relevant content provided. Core Viewpoints - In 2025, the CSI Cash Flow Index performed excellently, with an excess return of 11.2% compared to the CSI Dividend Index as of the end of November, mainly coming from the second half of the year. The index can stably outperform the CSI Dividend Index in the long - term, and its relative excess return does not depend on the dominance of growth or value styles [5][8]. - The adjustment of constituent stocks contributed good returns to the index. The high - frequency and high - proportion adjustment of constituent stocks in the past year has brought good performance, especially the 49 stocks included on June 16, with an average return of 27.1% in 90 days after inclusion, much higher than the 11.9% of the excluded stocks. The index also showed significant industry timing ability [5][15]. - The industry rotation strategy based on the industry distribution of the CSI Cash Flow Index had an annualized return of 12.8% and an annualized excess return of 1.9% since 2014. The index's industry allocation ability can bring significant excess returns in the value - dominant style, but the excess return is prone to large drawdowns in the growth - dominant style [5][20]. Summary by Directory 2025 CSI Cash Flow Index Performed Excellently - At the beginning of 2025, free - cash - flow index funds became a hot topic in the market. As of November 30, 59 new cash - flow index funds were issued, tracking multiple cash - flow - related indexes. The cash - flow index was questioned due to high - frequency constituent stock updates, over - fitting risks, and opaque historical data. From January to February, it significantly underperformed the dividend index, causing doubts about its excess - return stability [8]. - As of the end of November 2025, the excess return of the CSI Cash Flow Index compared to the CSI Dividend Index reached 11.2%, mainly from the second half of the year. In the first half, it underperformed by 2.5 percentage points, but from mid - July, it significantly outperformed, with a cumulative excess return of 14.1% in the second half [5][8]. - At the beginning of the value - to - growth style switch, the cash - flow index is prone to underperform the dividend index, which is in line with historical rules. During the value - to - growth style switch starting from September 2024, the CSI Cash Flow Index underperformed the CSI Dividend Index by 7.2 percentage points from November 13, 2024, to April 8, 2025 [11]. - The cash - flow index performed well both when the market rose significantly and the growth style dominated from July to September, and when the market adjusted and the value style dominated from October to November. Since July, it has achieved significant excess returns compared to the dividend index [12]. Component Stock Adjustment Contributed Good Returns to the Index - The CSI Cash Flow Index has a high - frequency and often high - proportion adjustment of constituent stocks. In the past year, the adjustment of constituent stocks contributed good returns. The index conducts quarterly adjustments in March, June, September, and December. In 2025Q3, 2025Q2, 2025Q1, and 2024Q4, the number of changed constituent stocks was 39, 49, 8, and 44 respectively. Except for the 8 stocks included on March 17, the average return of included stocks was higher than that of excluded stocks in other adjustments [15]. - In June, the index significantly increased its holdings in non - ferrous metals, power equipment and new energy, and machinery industries, showing significant industry timing ability. The non - ferrous metals (increased by 5.6%), agriculture, forestry, animal husbandry and fishery (increased by 5.3%), machinery (increased by 3.1%), and power equipment and new energy (increased by 2.7%) industries that were significantly increased in June had gains of 44%, 12%, 27%, and 43% respectively in the third quarter [16][17]. Industry Rotation Strategy Based on the Industry Distribution of the CSI Cash Flow Index - Since the free - cash - flow index has significant alpha returns, and industry allocation and timing ability are important sources of its excess returns, an industry rotation strategy is constructed based on the industry distribution of the CSI Cash Flow Index to verify its industry allocation ability. Due to the limited public data of the index's constituent stocks, the self - calculated constituent stocks since December 2013 are used [19]. - The industry rotation strategy based on the industry distribution of the CSI Cash Flow Index has an annualized return of 12.8% and an annualized excess return of 1.9% since 2014. The accumulation of excess returns has significant periodic characteristics. The index's industry allocation ability can bring more significant excess returns in the value - dominant style, while the excess return is prone to large drawdowns in the growth - dominant style [20].

Group 1 - The core viewpoint of the article emphasizes that free cash flow has become a high-potential investment direction in the domestic ETF market, with significant growth observed in overseas markets [1] - The development of cash flow ETFs in overseas markets is mature, with the largest US free cash flow ETF, COWZ, exceeding $20 billion in size as of April 25, 2025 [1][5] - Various index compilation schemes for overseas free cash flow products exist, with a focus on selecting stocks with the highest free cash flow yield [3][4] Group 2 - Domestic cash flow strategies are expected to be effective in the long term, as companies shift from growth-oriented to cash flow-focused management strategies [7] - The performance of large-cap stocks has outperformed small-cap stocks in the US cash flow products, with COWZ showing a widening lead over CALF since 2024 [6] - The domestic cash flow index has seen steady growth since 2014, with a focus on companies with high cash flow returns, leading to significant excess returns compared to broad market indices [7] Group 3 - The FTSE China A-Share Free Cash Flow Focus Index has a larger average market capitalization compared to other domestic cash flow indices, indicating a focus on large and mid-cap stocks [19][21] - The FTSE cash flow index has a higher dividend yield and lower valuation compared to its peers, making it an attractive investment option [33] - The FTSE cash flow index has shown a strong risk-return profile, outperforming traditional dividend indices since 2014 [36][37] Group 4 - The FTSE cash flow index benefits from a dual filtering approach that includes quality and low volatility factors, enhancing its risk management and long-term value [50][55] - The index's composition is heavily weighted towards consumer and cyclical sectors, with significant allocations in household appliances, non-ferrous metals, and food and beverage industries [26][27] - The index has a high overlap with major broad-based indices, which positions it well to benefit from future market management policies [31][32]

1. Report Industry Investment Rating The provided content does not mention the industry investment rating. 2. Core Viewpoints of the Report - Cash - flow ETFs have become popular products in overseas markets, and domestic products are being actively申报. "Large - medium market capitalization + central state - owned enterprises + abundant cash flow" is expected to be one of the annual investment themes. With policies like the new "Nine - Point Plan", the small - cap premium has declined, and policies are expected to drive central state - owned enterprises to improve profitability [2]. - Domestic free cash - flow indices are in the ascendant, and there are differences among them. The FTSE China A - Share Free Cash - Flow Focus Index (FTSE Cash - Flow) has a more detailed sample - selection space compared to similar indices, with 50 constituent stocks and a multi - angle screening mechanism that includes unique quality factors, volatility, and growth indicators [2]. - In terms of market - capitalization and industry distribution, the FTSE Cash - Flow shows a prominent large - medium market - capitalization style, with low valuation. It is relatively "resilient" during market corrections. The FTSE Cash - Flow has a lower correlation with traditional styles among cash - flow indices, has a high risk - return ratio, and can be used in investment strategies such as the dumbbell strategy with technology indices [2]. 3. Summary by Directory 3.1 Free Cash Flow Has Become a High - Potential Investment Direction in the Domestic ETF Market - **Maturity of Overseas Cash - Flow ETFs**: Overseas cash - flow products have achieved fruitful results. As of April 25, 2025, the largest US free cash - flow ETF, COWZ, had a scale of over $20 billion [8]. - **Diversity of Overseas Free Cash - Flow Index Compilation Schemes**: Different overseas free cash - flow indices have various compilation methods. For example, CALF and COWZ are based on different sample spaces and use free cash - flow yield for screening and weighting [10]. - **Long - Term Effectiveness of Domestic Cash - Flow Strategies**: Since 2012, A - share enterprises (excluding finance) have shifted from an incremental to a stock - thinking business model, and free cash - flow has been increasing steadily since 2014. Companies with sufficient cash flow have shown significant excess returns compared to broad - based indices [20]. - **"Large - Medium Market Capitalization + Central State - Owned Enterprises + Abundant Cash Flow" as an Investment Theme**: From 2021 - 2023, the small - cap style was dominant, but after the introduction of policies in 2024, the small - cap premium declined. The investment cash outflow of large - cap stocks has been rising steadily since June 2021, while that of small - cap stocks decreased significantly in Q1 2025 [22]. 3.2 Domestic Free Cash - Flow Indices Are in the Ascendant, with Differences Among Them - **Index Compilation Scheme Comparison**: The mainstream domestic cash - flow indices include the FTSE Cash - Flow, China Securities Cash - Flow, and Shenzhen Securities Information Cash - Flow. The FTSE Cash - Flow has 50 constituent stocks, excludes financial and real - estate industries, and uses a multi - factor screening mechanism. It combines cash - flow and volatility factors, which is expected to achieve excess returns [32][35]. - **Industry and Market - Capitalization Distribution Comparison** - **Market - Capitalization Distribution**: The FTSE Cash - Flow has a large - medium market - capitalization style, with 18% of its constituent stocks having a total market capitalization of over 100 billion. It is more "resilient" during market corrections [40]. - **Industry Distribution**: The FTSE Cash - Flow has high weights in industries such as household appliances, non - ferrous metals, and food and beverages. Overseas cash - flow ETFs have a higher proportion of technology stocks, and domestic cash - flow indices may include more technology - oriented enterprises in the future [46]. - **Constituent - Stock Overlap**: The constituent stocks of the FTSE Cash - Flow have a high overlap (95.95%) with major broad - based indices, especially 71.17% with the CSI 300, and are expected to benefit from subsequent policies [56]. - **Index Valuation**: As of July 18, 2025, the FTSE Cash - Flow has a relatively low price - to - earnings ratio (TTM of 11.25) and price - to - book ratio (1.49) among similar indices, and a relatively high dividend yield (4.76%), indicating investment value [61]. 3.3 The Risk - Return Profiles of Cash - Flow Indices Are Generally Similar, and the FTSE Cash - Flow Index Has a Lower Correlation with Traditional Styles - **Risk - Return Analysis**: The FTSE Cash - Flow has outperformed the dividend index in the long - term and has a high risk - return ratio. As of July 18, 2025, its risk - return ratio reached 0.85, higher than the CSI Dividend's 0.63 and the Dividend Low - Volatility's 0.68 [65]. - **Reasons for the FTSE Cash - Flow's Leading Returns** - **Relationship between Market Capitalization and Cash - Flow Yield**: The cash - flow yield factor is more effective in large - cap stocks. However, it also shows a certain enhancement effect in large - medium market - capitalization stock pools. The FTSE Cash - Flow selects stocks from large - medium market - capitalization indices such as the CSI 300 and CSI 500 based on free cash - flow yield [69][70]. - **Low - Volatility and Quality Factors**: The FTSE Cash - Flow uses quality and low - volatility factors from the FTSE Global Factor Index System, which enhances the index's risk - resistance and long - term holding value [85]. - **Investment Strategies**: The free cash - flow strategy and the dividend strategy can complement each other. The FTSE Cash - Flow, as a "dividend plus" strategy, has a lower correlation with technology indices and the partial - stock hybrid fund index than traditional dividend indices, and can be used to construct investment portfolios to improve risk diversification [96][97].

Core Viewpoint - The recent cautious sentiment in the market has led investors to focus on defensive indices that can effectively manage portfolio drawdowns while capturing structural opportunities [1][2]. Dividend Indices - Since 2021, dividend indices characterized by high dividend yields and stable payouts have attracted significant capital [2]. - The CSI Dividend Total Return Index has achieved a cumulative return of 276.45% since 2014, outperforming the CSI 300 Total Return Index, which recorded a gain of 108.54% during the same period [2][4]. - The index has shown a strong ability to "weather bull and bear markets," with a positive return probability of 73% over 11 years, compared to 55% for the CSI 300 [4]. Low Volatility Dividend Index - The Low Volatility Dividend Index has enhanced its annualized return to 13.29% by incorporating a low volatility factor, achieving a cumulative return of 294.21% [4][5]. - This strategy has a single-year win rate of 91%, providing a better option for risk-averse investors [4]. Free Cash Flow Indices - Free cash flow is a critical metric for assessing a company's ability to generate real earnings after maintaining operations and capital expenditures [5]. - The National Free Cash Flow Index has achieved an annualized return of 19.03% since 2014, with a cumulative return of 578.83%, significantly outperforming the CSI 300's annualized return of 6.91% [5][9]. - Even during the volatile period from 2021 to 2023, the index recorded a cumulative increase of 103.74% [5]. Strategy Comparison - In a low-interest-rate environment, both dividend and free cash flow strategies have become focal points for investors seeking stable and potential investment directions [9][10]. - Dividend strategies tend to select mature companies with lower growth expectations, while free cash flow strategies can identify companies with both cash flow generation and reinvestment capabilities [10]. Index Performance Summary - The performance of various indices from 2014 to 2024 shows that the CSI Dividend Index and the National Free Cash Flow Index have consistently outperformed the CSI 300 in terms of cumulative returns and annualized returns [8][12]. - The positive return probabilities for these indices are notably higher, with the Low Volatility Dividend Index achieving a 91% win rate [8][12]. Conclusion - For investors seeking stable dividends, the CSI Dividend Index is a suitable choice, while those willing to accept some volatility for potentially higher long-term returns may find the Free Cash Flow Index more appealing [12].