Henderson Far East Income claims dividends in Asia Pacific have grown faster than the global average and anticipates dividends from Asia Pacific ex-Japan to rise by 12-14% in 2021 to at least £268.3bn.
Looking at income, dividend growth in Asia Pacific has been significantly faster than the global average, up 139% over the last ten years, compared to 109% 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.
In 2020 dividends in Asia Pacific ex-Japan fell just -5.6%, less than the -9.3% fall in the rest of the world and significantly less than expectations outlined by Henderson Far East Income’s 2020 Asia Pacific Dividend Index, which anticipated that dividends in Asia Pacific could decline by 17% on a best-case basis. North America and Japan showed the greatest dividend resilience in 2020. Moreover, most of the decline in the region’s payouts was due to HSBC – loss of £6.1bn dividend – and Australian banks and mining groups. 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% for the year, while Indonesia (+2.9%), Taiwan (-5.1%) and Malaysia (-5.3%) 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.
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%). China and Hong Kong have seen 155% and 170% dividend growth respectively, with Taiwan and Indonesia close behind.
Henderson Far East Income expects dividends to rebound in 2021. The market expects dividends per share to jump by almost a fifth. This would translate to the total value of dividends rising by 12-14%1. Even at the lower end of that range Asia Pacific ex-Japan will deliver record dividend payouts of £268.3bn this year.
Mike Kerley, Fund Manager of Henderson Far East Income comments:
“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. We expect 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.”