Dividends from listed companies in the Asia Pacific region, excluding Japan, soared 15.9% to a record £222.6bn in the twelve months to the end of July 2018, according to a report by asset manager and ETF issuer Janus Henderson.
Dividends from companies across the Asia Pacific region have tripled since 2009.
The strong growth, more than twice the estimated 5.5% growth in dividends seen across the rest of the world, points to the growing attractiveness of Asia Pacific-listed stocks to income-seeking investors.
On an underlying basis, which excludes the impact of exchange rates and special dividends, dividend growth in the Asia Pacific region, excluding Japan, still grew at an impressive 13.2%, also well ahead of the global total.
Dividends in the region have been growing at a faster-than-average rate over the medium term, too.
Between 2009 and the end of July 2018, annual dividends more than tripled in value (+210%) while dividends from the rest of the world doubled (+103%) and UK dividends grew by only 76.5% over the same period.
The fastest growth has come from Taiwan and South Korea, where dividends have increased almost 150% since 2013, almost three times faster than the Asia Pacific total of 57.2% over the same period.
While analysts at Janus Henderson expect the current dividend growth rate to drop off slightly, the firm is still predicting a rise of 10.9% on an underlying basis over the next twelve months, equivalent to a headline growth rate of 7.5%.
Janus Henderson notes the Asia Pacific region has become an increasingly important source of the world’s equity income. By 2017, companies there accounted for one pound in every six of the dividends paid worldwide, up from just over one in every nine in 2009.
The report further highlights that the UK, where companies pay more dividends than any other country other than the United States, has seen its share of the global dividend pie drop from one pound in every ten in 2009 to one pound in every twelve in 2017, despite itself showing decent growth over the period.
Mike Kerley, Director of Pan-Asian Equities and a Portfolio Manager at Janus Henderson Investors, commented, “The Asia Pacific region is much more than just a crucible of investment and growth, enticing investors interested in making capital gains. As economies have developed, and companies have matured, it’s now a huge income-generating machine too.”
Asia equity income ETFs
For ETF investors looking to capitalise on the theme there are a number of options available.
In the US, there is the iShares Asia/Pacific Dividend 30 Fund (DVYA US). This fund tracks the Dow Jones Asia/Pacific Select Dividend 30 Index, providing exposure to 30 of the highest yielding stocks in the region, weighted by dividend yield. This strategy aims to maximize dividend exposure, with the index currently showing a yield of 5.3%. The fund has around $30 million in assets under management and comes with an expense ratio of 0.49%.
In Europe, investors could consider the iShares Asia Pacific Dividend UCITS ETF (IAPD LN), which tracks the same index as the US listed fund. The European domiciled fund has had considerably more success with investors, however, accumulating more than $450m in AUM. Notably, it is more expensive with a total expense ratio (TER) of 0.59%.
Investors could also consider the SPDR S&P Pan Asia Dividend Aristocrats UCITS ETF (PADV LN) or the WisdomTree Emerging Asia Equity Income UCITS ETF (DEMA LN).
The SPDR fund targets dividend sustainability by only holding firms that have increased their dividends for at least seven years. It consists of 100 securities from the region which collectively offer a dividend yield of 3.4%. PADV has $130m in AUM and comes with a TER of 0.55%.
The WisdomTree fund tracks an in-house index that consists of the top 30% of stocks by dividend yield within the region. Stocks are weighted by cash dividends paid, boosting the index’s dividend yield to 4.9%. DEMA is the cheapest of the three funds with a TER of 0.54%. It is also the smallest with $12m in assets.