At first glance, growth in dividend payments by APAC firms doesn’t appear that impressive. While global dividend payouts rose by 5.3% last year according to Vanguard research, the growth rate for the Pacific region was 4%.
But according to Miko Huang, Senior Manager, Equity Index Product Management APAC at London Stock Exchange Group, it is increasingly becoming a compelling destination for dividend seekers.
She explained this opportunity is underpinned by diverse and evolving market characteristics. Singapore’s domestically focused economy promises strong and stable yields across banks as well as telecoms and infrastructure-linked companies with regional exposure, while Indonesia’s resource companies are increasingly returning cash to shareholders. Malaysia contributes income through advanced manufacturing, government-linked enterprises and Islamic finance, whereas Thailand’s dividend profile is supported by energy, utilities and infrastructure operators with historically steady cash flows.
One of the firms at the forefront of the Asia Pacific dividend boom is Australian steelmaker BlueScope, which announced in mid-January it would return A$438m in surplus cash to shareholders through a special dividend. The company has delivered over A$3.8bn in shareholder returns since 2017.
“This special dividend demonstrates BlueScope’s ability to generate and distribute returns to its shareholders,” says Managing Director and CEO, Mark Vassella. “The board will continue to carefully balance investment in growth with shareholders returns as cash flows build.”
The company’s previous policy was to distribute at least 50% of free cash flow to shareholders as consistent dividends and buy-backs. Its new target is to distribute at least 75% of free cash flow as ordinary dividends.
The ten-year average dividend yield of the FTSE ASEAN Index (which captures the large- and mid-cap companies listed in Singapore, Malaysia, Indonesia, Thailand and Philippines) is higher than that of other major global benchmarks, including FTSE Asia Pacific ex Japan Australia and New Zealand Index, FTSE USA Index, FTSE Developed Europe Index and FTSE Emerging Index.
“Looking ahead, ASEAN’s forward 12-month dividend yield remains attractive compared with other major markets worldwide, highlighting the region’s appeal for income-oriented investors,” said Huang.
In an interview with Interactive Investor last year, Isaac Thong, Manager of the Aberdeen Asian Income Fund noted Asian companies are better placed than ever to pay and grow dividends on a sustainable basis. Free cash flow generation and debt levels are at their best level historically and many companies are realising the benefits of having a strong dividend policy.
“When you look at our investment universe – and we define that by companies that pay a cash dividend and have dividend yields of above 1% – that number a decade ago stood at 570 companies,” said Thong. “Today, that number stands at 740, a 30% increase. If we are going to be even more strict than that and we raise that dividend yield threshold to 4%, we have 330 companies today versus 190 ten years ago, a 70% increase.”
He observed that dividends accounted for almost 60% of total returns in Asia over the last decade compared to just over 50% in the preceding ten years.
