The words “Asia” and “growth” have been intertwined for decades. Asia is the fastest-growing region in the world and over the last decade its companies have grown profits at a faster pace than any other region’s. However, it is still surprising that the growth and resilience of dividends in Asia is not celebrated in the same way. The performance of dividends in Asia has been nothing short of spectacular.
Over the last decade dividends in Asia have grown faster than the global average; South Korea’s, for example, were more than three times larger in 2020 than in 2010. Asian payouts are also highly resilient. Regional dividends fell by less than 6% in 2020. This is an incredible outcome in a year where global pre-tax profits slumped by 23%, compared with only 4% in Asia. Ignoring income in Asia is to ignore the most exciting region globally for potential upside in dividends.
A 52-year streak
Dividend-paying companies don’t have to be boring. The region boasts an abundance of exciting growth-business models with high and rising dividends. A prime example is Australia’s Macquarie Group (Sydney: MQG), an investment bank and financial-services group. It is uniquely placed to capture growth opportunities in many of the investment buzzwords of today: infrastructure, commodities, renewables, and technology.
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It has a strong record and maintains a high level of recurring income from a leading asset-management business, enabling it to grow dividends. Management is highly regarded, with 52 years of unbroken profitability and over 200% total shareholder return over the last five years. With a strong surplus capital position and focus on green energy projects, we believe there is plenty more left in the tank.
Thinking outside the box
Asia offers some exciting investment themes but not all of them pay dividends, so lateral thinking is sometimes required. The growth of e-commerce in Asia is one such theme, but how do income investors take advantage of a sector without payouts?
We believe the answer is Mapletree Logistics Trust (Singapore: M44U), listed in Singapore. It’s an Asia-focused logistics real-estate investment trust (Reit) that owns high-quality warehousing facilities crucial to e-commerce players. It boasts high occupancy, reasonable gearing levels and low interest-rate costs, which enable it to pay a 4% dividend yield and enjoy long-term dividend-per-share (DPS) growth. The diversification across eight attractive Asian markets, including India, Vietnam and Singapore, is also particularly appealing.
Don’t ignore the boring companies
Holding companies can go unnoticed as sources of income growth, but their listed subsidiaries certainly turn heads. More lateral thinking is required to capture exposure to fast-growing technology companies, but it must be supported by valuations and yield. The solution is LG Corp (Seoul: 003550), listed in South Korea. It trades at a 60% discount to net asset value despite its listed subsidiaries performing well, and owns stakes in some of the leading technology assets in the country, such as LG Chem, one of the world’s top electric-vehicle battery producers. Following a group restructuring, and with dividend per share growth rising, the best may be yet to come.
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