Dividends from companies across the Asia-Pacific region (ex Japan) soared 15.9% to a record £222.6bn ($289.9bn, €249.8bn) in the 12 months to the end of July 2018, according to the Henderson Far East Income Index.
The regional growth was more than twice the estimated 5.5% rise in dividends seen across the rest of the world, the global asset manager stated.
Record breaking growth expected
The value of dividends paid in Asia Pacific (ex Japan) is significant.
Between 2009 and the end of July 2018, companies paid their shareholders £1.3trn, and on an annual basis, dividends have more than tripled in value (+210%).
Meanwhile, dividends from the rest of the world have doubled (+103%) – certainly a dramatic rate of growth, but just half the pace of the Asia-Pacific region.
Over the same period, UK dividends have grown by 76.5%, impressive for a mature economy, but behind the faster-developing regions of the world.
On an underlying basis, which excludes the impact of exchange rates and volatile special dividends, dividend growth in Asia Pacific (ex Japan) over the last 12 months was equivalent to 13.2%, also well ahead of the global total.
Looking forward, Janus Henderson expects dividends in the region to rise 10.9% on an underlying basis over the next 12 months.
This would break a new record by reaching around £239bn, equivalent to a headline growth rate of 7.5%.
Crucible of growth
The Asia-Pacific region is an increasingly important source of the world’s equity income, according to Janus Henderson.
By 2017, companies there accounted for £1 in every £6 of the dividends paid worldwide, up from just over £1 in every £9 in 2009.
Over the same period, 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 £1 in every £10 in 2009 to £1 in every £12 in 2017, despite itself showing strong growth over the period.
Mike Kerley, manager of Henderson Far East Income, explained: “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. This development, in conjunction with ageing Asian populations increasingly looking to receive an income from their savings, is resulting in a more entrenched culture of dividend paying and this is providing opportunity for UK savers too.”
Eclectic mix
The fastest growth has come from Taiwan and South Korea, where, by the end of July this year, dividends had each increased close to 150% since 2013, just under three times faster than the Asia Pacific total of 57.2%.
The largest increases in Taiwan have been from chemicals companies, whose dividends have risen seven-fold.
Companies such as Nan-Ya Plastics have fed the consumer goods manufacturing boom in Asia. Banking and technology have also seen rapid growth. In South Korea, one quarter of the total is contributed by Samsung Electronics, whose payouts have almost quintupled since 2013 as it has risen to share global dominance of the consumer electronics market with Apple.
Taiwan, China and Hong Kong have together contributed three-fifths of the increase in the Asia Pacific dividends since 2013. Taiwan has contributed the most to growth, despite coming from a low base.
Kerley added: “The Asia-Pacific region includes an eclectic mix of countries from the most highly developed, such as Australia, to those still considered emerging markets, such as Thailand. Their economies have become increasingly inter-dependent over the last 20 years, driven by the rise of China, and the closer integration of the region into global supply chains. It’s a complex story, and demands a rigorous approach to stock selection to find the fastest income growth.
“The yield on equities is still lower in the Asia Pacific region than you might receive on UK shares, but the dividend growth is much faster, less dependent on a few very large companies, and the sector split allows UK investors access to opportunities that are simply not available in decent size at home, such as technology.
“It would certainly not be appropriate for most UK income investors to eschew UK shares, as it’s really important to ensure there is a relationship between your investment income and your living costs. But equally, there are real benefits for many investors in balancing their portfolios with income from other parts of the world.
He added: “Adding the Asia-Pacific region brings faster growth and helps diversify a UK income investor’s holdings, making it a crucial addition to an income portfolio.”
