Henderson sees strong dividend growth in Korea

Added 29th August 2016

South Korea is one of the most attractive regions in Asia in terms of dividend growth potential, said Henderson Asian Dividend Income Fund co-manager Sat Duhra.

Henderson sees strong dividend growth in Korea

Stocks in Asia-Pacific ex-Japan showed 3.7% year-on-year dividend growth in the second quarter, the recent Henderson Global Dividend Index report noted.

“South Korea stood out, with dividends up by a third on a headline and underlying basis, the fastest growth rate in the world during the quarter,” it noted.

“Many markets in Asia are becoming more mature. In places like Korea, the shareholder-friendly initiatives, such as improved corporate governance, share buybacks and increasing dividend payouts have been very encouraging this year,” Duhra told FSA.

The underlying dividend growth of stocks in Australia, Hong Kong and Singapore fell 0.2%, 2.4% and 21.3% during the same period.

By comparison, global dividends rose in underlying terms by 1.2% year-on-year to $421.6bn, the firm said.  

Duhra expected dividend growth in Korea and India to grow 20% this year on average, similar to the 20% annual gain in the past three years due to historically low payout ratios.

He said his fund’s dividend yield is likely to remain at the currentl level of 5-6% a year. The firm is in general underweight South Korea but he focused on selective firms “pretty much across the board”, which he believes have solid business growth and high dividend yields. Examples include some innovation firms, banks as well as infrastructure companies.

He is wary of some Australian utilities firms that are getting too expensive, and also cutting exposure on Australian and Chinese companies compared to 12 months ago.

“It’s a big trap to look at valuations using the price-earnings ratio in Asia. The accounting policies across countries are very different. What one should focus on is the genuine increase in cashflow,” he added.

 

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The Henderson Asian Dividend Income Fund vs its benchmark, the MSCI Asia Pacific ex-Japan, over the last three years:

 

 

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