People don’t like the unfamiliar. We like to stick to that which we know; it gives us a sense of security.
It’s certainly a characteristic which defines us as stock investors too. Modern trading platforms give us an entire planet’s worth of stocks to examine and to plough our money into, and yet most of us tend to stick with companies which are listed on local exchanges.
I’m not any different. My shares portfolio is chock full of London-listed shares and predominantly those on the FTSE 100 and FTSE 250. It’s quite possible that I’m missing out on big returns by following such a strategy. And the chances are high that you are too.
The Amazing Asia Pacific
A recent report from Janus Henderson Investors reveals perfectly how such a philosophy could already have cost British investors a fortune.
The financial giant’s latest Henderson Far East Income index showed that dividends from the Asia Pacific region (excluding those from Japanese firms) leapt 8.3% in the year to April 2019 and reached record highs of £229.7bn. The research also showed that underlying growth of 11.3% was 3% higher than the rest of the world in the same period, a reading which excludes the contribution of special dividends and foreign currency movements.
Underlying growth in the last year was fastest in South Korea, Singapore and China, with the latter emerging as the biggest contributor to that annual growth.
Commenting on these exceptional dividend rises, Janus Henderson notes that “many companies are becoming very large and ever more mature… features which tend to lead to higher dividend payments anyway as operations become strongly cash generative.” It adds that these increases also reflect “a changing corporate attitude that increasingly recognises the importance of returning capital to shareholders.”
UK dividend growth trounced
This rampant growth isn’t a recent phenomenon, either. According to the index, dividends from Asia Pacific companies have surged in the 10 years to April 2019 (up 220.8% to be exact). This compares with growth of 119.8% from equities outside the region.
What’s more, this payout expansion is particularly stark when you compare it with that seen here in the UK. Underlying dividends from Asia Pacific stood at £57.6bn in the year to April 2009, beating the £50.1bn paid out by British companies by a nose. However, the £229.7bn which companies in Asia paid out in the most recent 12-month period dwarfs the £94.8bn shelled out by UK businesses.
More to come!
Now Janus Henderson expects underlying dividend growth in Asia Pacific to slow a little over the next year, reflecting lower corporate earnings growth of 6% to 7%. It says that shareholder payouts should rise by 7.5% on an underlying basis, though clearly this forecast is still nothing to be sniffed at.
Besides, the company reckons that over the long term, companies in this far-flung region should prove brilliant investment destinations, commenting that: “Asia-Pacific can continue to generate faster dividend growth than the rest of the world over the longer term.”
Naturally I’m not saying that investors should give UK stocks a miss. There’s no shortage of delicious dividend growers to be found on London indices right now, after all. But it’s clearly worthwhile to examine some of the hot income stocks currently available on Asian stock exchanges, too. Just ask Janus Henderson.
