High-yield vs. Growth Investment Dilemma: Rational Choices Behind Taiwan Stock Market's New Highs

Taiwan stocks broke through 28,400 points to hit a new all-time high. It seems glorious, but it hides investors’ inner conflicts—facing the tempting rise of AI technology stocks, should they continue to chase or turn around to embrace stable cash flow? The most actively traded ETFs recently have already provided the answer.

Why Are Investors Turning to High-Yield Strategies at Market Highs?

According to market statistics, among the top ten most frequently traded passive Taiwan stock ETFs over the past month, high-dividend products occupy half the list: Capital Securities Taiwan Select High Dividend (00919), Cathay Sustainably High Dividend (00878), Fubon Select High Dividend 30 (00900), Yuanta High Dividend (0056), and Yuanta Taiwan Value High Dividend (00940) are all favorites.

This is no coincidence. When the stock market is at a historical high, investors’ mentality subtly shifts—no longer blindly chasing highs, but focusing on “downside protection” and “ongoing cash flow.” Especially, Capital Securities Taiwan Select High Dividend (00919) has risen 2.33% in recent months, maintaining an annualized dividend yield of over 10% for 11 consecutive quarters, becoming a new favorite among dividend investors. Its latest quarterly dividend of 0.54 yuan, with a ex-dividend date on December 16, offers stable allocation, which is the core attraction for investment funds.

This reflects a deeper logic: when high-growth stocks are overvalued and future growth potential is limited, assets with “income protection” become the best tools to hedge against market uncertainties.

Lessons from the U.S. Stock Quality Debate: The Truth About AI Investment

Turning to the international scene, a fierce debate about “what constitutes a quality company” is unfolding in the U.S. stock market, with implications worth pondering.

Two U.S. ETFs with over a hundred billion dollars in assets—iShares MSCI USA Quality Factor (QUAL) and Invesco S&P 500 Quality (SPHQ)—both claim to invest in financially sound quality companies. However, a key difference in their stock selection logic leads to vastly different holdings.

SPHQ uses a “cold” indicator: accounts receivable ratio. This means it emphasizes a company’s “cash actually received,” rather than accounts receivable on the books. The result? AI giants like NVIDIA, Meta, and Microsoft are gradually excluded from the portfolio. The reason is quite stark—taking NVIDIA as an example, its latest quarter’s accounts receivable surged by $16 billion. The company needs to prepay large sums and wait for customer payments, causing cash profit quality to decline quietly.

In contrast, QUAL does not include this indicator, so its portfolio remains heavily weighted toward tech giants. The result? When AI stocks surged, SPHQ led for a time; but over the past six months, QUAL, holding onto tech stocks, has significantly outperformed.

This phenomenon raises a core dilemma for investors: Are the hundreds of billions of dollars that tech giants are pouring into AI investments future gold mines, or are they draining cash like a black hole? When corporate cash flows tighten or even debt-funded investments increase, can the label “quality” still be trusted?

The Reality of High-Yield ETFs in Taiwan

Facing similar market concerns, Taiwan’s high-yield ETFs adopt a more pragmatic approach. For example, manager Hsieh Ming-Chih pointed out that as the market has reached high levels, some funds are shifting from overhyped AI tech stocks to value stocks with reasonable valuations, stable operations, and dividend potential, especially financial stocks.

Why financial stocks? Hsieh explained that in a declining interest rate environment, financial stocks have room for profit growth and stable dividend payout potential. This “growth + value” allocation logic not only pursues dividend income but also captures price differences during market rotations. In short, there’s no need to be stuck between AI and traditional stocks—by combining a basket, investors can meet both needs simultaneously.

The Ultimate Investment Decision-Making Insight

BlackRock’s chief investment strategist Wei Li once said that the uncertainty brought by AI is too great, and the current “spend first, wait for income later” model has yet to prove profitability. This explains why many smart funds turn to high-yield ETFs at market highs—rather than being overwhelmed by dreams, they prefer to hold onto more certain cash flows.

Mamdouh Medhat, research director at Dimensional Fund Advisors, also gave straightforward advice: high-quality investments don’t need to be complicated. Focus on companies with high profitability, reasonable valuations, and avoid those with excessive capital expenditures. Over the long term, this approach can generate excess returns.

Conclusion

As Taiwan stocks hit new highs, the capital allocation choices speak volumes. Whether it’s the debate over the definition of “quality” in U.S. stocks or investors’ preference for high dividends in Taiwan, they all point to the same logic— in environments of high uncertainty, companies with strong financial health, stable cash flow, and willingness to reward shareholders are the true foundation of long-term investment.

For investors, rather than debating whether to bet on AI concept stocks, it might be wiser to diversify into a basket of stable high-yield stocks. This way, they can participate in market growth while reducing volatility risk. Perhaps this is a more rational and intelligent asset allocation choice at present.