Asia is poised to drive global economic growth and is expected to account for more than half of the world’s GDP growth by 2025. There are major demographic dividends in Asia yet to be fully realised, led by giants such as China and India, while dynamic Southeast Asian economies, including Indonesia and Thailand, are also growing rapidly.
The focus on dividends is increasing across corporate Asia: 50% of the Asia-Pacific ex-Japan region is now yielding more than 2.5%. We believe the risk of dividend cuts is low in Asia owing to robust earnings and strong balance sheets, which provide good support for growing dividends.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Taiwan’s chip champion
TSMC (Taipei: 2330), the fund’s largest holding, is a global leader in producing semiconductors that are key building blocks for supporting the use of AI. Over the past few decades it has secured a sizeable advantage when it comes to production. It leads the global market and has built relationships with key customers.
It would be difficult for potential rivals to enter the market as they would need to spend huge amounts to replicate TSMC’s production system. Demand for its products, moreover, is strong. TSMC can therefore generate robust free cash flows. This helps support growing dividends, and the group’s shareholders have enjoyed good capital and dividend growth to date.
Taiwan-based Sunonwealth (Taipei: 2421) makes cooling fans for data centres. It supplies clients in industries such as IT, automotive electronics and network communication. A niche player, Sunonwealth is a preferred partner for customised cooling solutions, which enhances its market position.
It has also developed the first-ever MagLev motor fan, the world’s smallest and thinnest magnetic levitation motor fan, showcasing its innovation. As AI technology becomes more complex, the need for advanced cooling solutions grows. This makes Sunonwealth a vital part of the AI supply chain.
The company’s strong balance sheet and cash flows have historically supported a healthy dividend payout and an attractive yield.
Accton (Taipei: 2345) is a Taiwanese firm that makes high-speed networking switches for US heavyweights such as Amazon and Facebook, as well as others, including HP, Nokia, and Ericsson. The company boasts a strong research and development edge, a broad product range and a solid record of over 30 years.
The business also has high barriers to entry, deterring rivals. This is due to complex technical designs, close relationships with high-profile, established companies, long qualification times and cost competitiveness driven by the advantages of scale.
It has not only diversified its key customer base beyond Amazon (it now has Intel and Meta on its books) but has also extended the range of its switch business, which now focuses on AI accelerators too. Accton’s consistent improvement in profitability underpins its ability to deliver steady income growth over the long term.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
‘My estate faces a £214,000 tax bill unless I get married’ - the perils of the inheritance tax pension reformsThe chancellor's plans to charge inheritance tax on unused pension wealth could be bad news for cohabiting couples
-
Investec enters cash ISA market with top rate for saversThe bank and wealth management group's new fixed-rate deal is one of the best on the market.
-
Albert Einstein's first violin sells for £860,000 at auctionAlbert Einstein left his first violin behind as he escaped Nazi Germany. Last week, it became the most expensive instrument not owned by a concert violinist
-
Who is Rob Granieri, the mysterious billionaire leader of Jane Street?Profits at Jane Street have exploded, throwing billionaire Rob Granieri into the limelight. But it’s not just the firm’s success that is prompting scrutiny
-
Emerging markets boast top-quality growth stocks at bargain pricesOpinion Lim Wen Loong, investment director at Ashoka WhiteOak Capital, selects three growth stocks where he’d put his money
-
Beware the bubble in bitcoin treasury companiesBitcoin treasury companies are no longer coining it. Short this one, says Matthew Partridge
-
Klarna leads a financial revolution – should investors buy?Klarna has ambitions to rewire the global payments system and has huge growth potential
-
New faces don’t solve old problems – why strategy also matters when it comes to investment trustsOpinion Changing managers often fails to boost a trust’s performance, says Max King
-
How to profit from silver’s record riseSilver often lets investors down, but there may now be room for further gains, says Dominic Frisby
-
Are venture-capital trusts worth investing in?Venture-capital trusts are a tax-efficient way to invest in early-stage companies. But are they worth the risk?
