Looking at income, dividend growth in Asia Pacific has been significantly faster than the global average, up 139 per cent over the last ten years, compared to 109 per cent for the rest of the world. Dividend growth in South Korea has been surpassed only by Russia over that period.
And this has continued during the pandemic, which has had a significantly milder effect on dividends in Asia than it has in the rest of the world, according to data from Henderson Far East, shared with City A.M. today.
Last year, dividends in Asia Pacific ex-Japan fell just 5.6 per cent, less than the 9.3 per cent fall in the rest of the world. North America and Japan showed the greatest dividend resilience in 2020.
HSBC and Australian banks drive dip
Moreover, most of the decline in the region’s payouts was due to HSBC, a loss of £6.1bn in dividend, as well as Australian banks and mining groups, Henderson Far East said.
Without these companies, Asia Pacific ex-Japan’s dividend payouts were flat year-on-year. At the other end of the scale, the 14 largest dividend increases were all in China and dividend payouts in China rose 9.6 per cent for the year, while Indonesia (2.9 per cent), Taiwan (5.1 per cent) and Malaysia (5.3 per cent) also showed relative resistance.
Crucially, debt levels remain much lower in the Asia Pacific region than they do elsewhere, while dividend cover levels are much higher (2.4x in Asia Pacific v 1.6x in the rest of the world) and free cash flow is strong, the firm stressed.
Across Asia, dividends from healthcare, technology and consumer basics, media and communications and utilities were flat or higher year-on-year in 2020, while basic materials, consumer discretionary, energy and financial sectors were more severely impacted. Over the longer term, South Korea is the standout winner.
Its dividends in 2020 were more than 3x bigger than in 2010 (+216 per cent). China and Hong Kong have seen 155% and 170 per cent dividend growth respectively, with Taiwan and Indonesia close behind.
The market expects dividends per share to jump by almost a fifth, the firm stressed. This would translate to the total value of dividends rising by 12-14 per cent.
Even at the lower end of that range Asia Pacific ex-Japan will deliver record dividend payouts of £268.3bn this year, stressed Mike Kerley, fund manager of Henderson Far East Income.
“Asia Pacific is increasingly becoming a dividend powerhouse. Whether we look at profit, cash balances, net debts or cash flow, Asia Pacific companies are showing that the fast-growing dividends they are paying are extremely well supported by strong fundamentals,” said Kerley.
Kerley expected there to be a surge in one-off specials dividends too, especially from the big mining companies in Australia that are trading so strongly at present.
“Moreover, the long-term prospects for the whole region are extremely positive, while the short-term divergence between the fastest recovering countries and sectors and the slowest provide opportunities. This all adds up to a very compelling investment case for Asia Pacific ex-Japan,” he concluded.