Growth in dividends in the Asia Pacific region, excluding Japan, have grown significantly over the past year to April, with the likes of South Korea, China and Singapore seeing some of the fastest growth in dividends globally, according to figures published by the Henderson Far East Income fund.
It suggests that since 2009, dividends paid out in the region have risen by more than 220%, about twice as fast as the rest of the world, and have proved resilient more recently in the face of slowing globaly economic growth. Over that period, companies in the region paid out some £1.5trn (€1.67trn) to shareholders.
In the year to the end of April 2019, headline dividends rose by 8.3% to some £229.7bn (€260bn ), which was in line with a forecast made by the fund a year ago for £230.4bn. This rate of increase was below the global average of 9.6% on a headline basis, but when adjusted for factors such as lower one-off special dividends, and the exchange rate efffect, Henderson pegs the growth at a higher 11.3% on an underlying basis, which it says is some 3% better than the global underlying rate of increase.
A decade ago, dividends from the region were just £57.6bn (€64.4bn)
The only countries in the region to have seen lower payouts over the pasts year were Malaysia and New Zealand. The biggest contribution on an underlying basis came from China, the fund suggested.
Dividend growth over the coming year is expected to be more than the corporate profit growth estimate of 6-7%. This is because there is room for payout ratios to expand. The Henderson Far East Income fund expects dividend growth of 7.5% on an underlying basis, taking total payouts to £243.7bn (€xx ) by April 2020.
Mike Kerley, portfolio manger on the fund, said: "Asia Pacific has a happy combination of relatively high yields and low payout ratios, because equity valuations themselves are low compared to other parts of the world. Rapid dividend growth comes on top as companies across Asia Pacific are increasingly adopting a culture of dividend paying. This is partly because many companies are becoming very large and ever more mature, both features which tend to lead to higher dividend payments anyway as operations become strongly cash generative. And it partly reflects a changing corporate attitude that increasingly recognises the importance of returning capital to shareholders. A strong and growing income stream not only provides a helpful basis for valuing a company's share price, but there is less risk for shareholders if they see a steady flow of dividends, rather than watching cash pile up on a company's balance sheet."
"Trade tensions loom large in the headlines, and in reality they are likely to drag on for some time yet. Although the US' target is mainly China, the implications spread across the region. Companies in Taiwan, for example, are being affected because they have built production in mainland China. China's exporters and technology companies may suffer, but the government is likely to implement policies to mitigate the worst effects, for example, by increasing infrastructure investment, or seeking to boost consumer spending."
"We remain very optimistic that Asia Pacific can continue to generate faster dividend growth than the rest of the world over the longer term."