The "3 Highs & 2 Lows" Rule for Screening High-Dividend-Potential Stocks

Many investors struggle to identify stocks with high dividend potential. Today, we introduce the "3 Highs & 2 Lows" rule. What exactly is it? Let’s dive in.

What is the "3 Highs & 2 Lows" Rule?
As the name suggests, it consists of three highs and two lows:

• 3 Highs: High accumulation, high stock price, high earnings.

• 2 Lows: Low valuation, low share capital.

1. The 3 Highs

1. High Accumulation

   • Sum of capital reserve and undistributed profit per share > ¥5.

2. High Stock Price

   • Pre-dividend stock price ≥ ¥10 (ideally ≥ ¥40).

3. High Earnings

   • EPS over the past 3 years > ¥0.8, with earnings growth of 60–80%.

2. The 2 Lows

1. Low Valuation

   • P/E ratio below the sector average.

   • SME board: ~40x (can reach 60x during bubbles).

   • ChiNext board: ~70x.

2. Low Share Capital

   • Total shares outstanding < 400 million, with no imminent lock-up expiries.