Source: The Business TimesAuthor: Cai Haoxiang
26/6/2012
INVESTORS going for dividend-paying companies in Asia have yet another reason to stick to their strategy, said a Citi report yesterday.
It said relatively few funds invest on an income rather than growth basis in the Asia-Pacific region excluding Japan.
But dividend payouts are on the rise and more companies are paying dividends.
"Dividends work as they align insiders' with investors' interests," said the report.
"Omens for dividends remain good - corporate gearing in Asia ex-Japan remains low and well below historic averages . . .
"Investors tend to believe that dividends are as volatile as earnings, but historically that has not been the case."
The report said the vast majority of funds investing in Asia-Pacific excluding Japan - more than four in five - invest in growth stocks as a matter of strategy.
In contrast, only 1.8 per cent of funds invest in stocks because they give a stream of income, compared with 11 per cent in US and Canada and 17 per cent in Western Europe, said the report.
"When fewer people are chasing the same strategy, there is greater room for outperformance," it said.
Moreover, dividend payouts have been on the rise.
In 2000, the average divided payout ratio in Asia ex-Japan was 26.3 per cent of earnings. At the end of last year, payout levels rose to 35 per cent.
Singapore's payout levels have similarly risen consistently from 29.2 per cent of earnings in 2000 to 43.4 per cent in 2011.
New Zealand and Australia are the most generous dividend payers with 2011 payout levels of 78.2 and 62.5 per cent respectively, while Korea had a payout level last year of just 14.1 per cent.
Meanwhile, some 93 per cent of companies in Asia now pay dividends. In Singapore, the level stands at 98 per cent.
Dividend yields are also outperforming bond yields more than ever.
In 2000, 5 per cent of Asian companies had dividend yields exceeding their sovereign bond yields. In 2011, the number for Asia ex-Japan was 45 per cent.
For AAA-rated Singapore, 84 per cent of companies here have a dividend yield exceeding the risk-free sovereign rate.
In a second report yesterday, Citi said yields are not expensive to obtain in Asia, going by valuation measures such as sales yield, trailing earnings yield, cashflow yield and book yield.
It constructed a defensive portfolio of dividend-paying stocks that can continue to pay out cash sustainably. The portfolio outperformed the S&P Asia-Pacific ex-Japan broad market index by 10 percentage points last year and three percentage points year-to-date.
Singapore-listed stocks in the portfolio are transport operator ComfortDelGro, and beer and spirits maker Thai Beverage
No comments:
Post a Comment