The region’s dividend stocks look promising because the pace of economic growth is highly correlated with dividend returns, said Lee.
“Rising levels of urbanisation, industrialisation, positive demographics and increasing levels of investment in infrastructure are all contributing to driving long-term economic growth in the region.”
Focus on dividend growers
Many high yield dividend stocks are expensive because they have been increasingly popular investments in the low yield environment, Lee noted.
The firm seeks to look beyond a stock’s current yield and focus on the future dividend stream.
“What this does is ensure that there is both sustainability and growth in the company’s dividend policy. As long as these are present, the likelihood is that the stock will also be a strong long-term outperformer of the market.”
“Companies that grow their dividends gradually, rather than ones that have flat or erratic dividends, have consistently done better over the long term.”
Lee finds dividend ideas in some Australian mining firms.
“Despite a fall in commodity prices, the upshot is that a number of larger names are either reducing or keeping capital expenditure levels steady. Their strong operating cash flows have allowed them to adopt progressive dividend policies.
“Only the most viable projects are earmarked for investment and, in combination with debt reduction and the spin-off of non-core assets, miners have been able to increase cash returns to shareholders.”
Hong Kong property stocks are another dividend opportunity due to their steady stream of profits from rental, largely in commercial properties. Furthermore, valuations are relatively cheap.
The firm also favours Macau gaming companies, and expects companies in the sector to grow dividends strongly in the next two years.
“Share prices of casino operators have come down to more reasonable levels over the past 12 months,” said Lee.
In a separate note, BlackRock also said that Macao casino stocks are becoming more attractive due to the easing of visa restrictions for mainland visitors.