Income investors hunting for dividend stocks can find plenty of potential opportunities in Asia.In identifying dividend stocks country selection is also important in addition to finding the right company. This is because not all countries in Asia are known for having strong dividend-paying cultures.
Fund manager Yu Zhang of Matthews Asia Dividend Fund, Matthews Asia addressed this point in an interview on FE Trustnet. From the interview:
Question: Which Asian countries have the strongest dividend culture?
“Surprisingly, if anything, on average, dividend payouts out of Asia compared to what you see here in Europe actually is pretty low. On average we’re still talking about 30 to 35 per cent dividend payout, which is nothing spectacular. Having said that, in Asia you’re talking about 13 different major markets. So different markets have their own slight variations. Good places to look for high-yielding stocks will get you to places like Taiwan, Singapore or Australia. Usually companies there are very accustomed to pay a high amount of income in dividends to shareholders. Some of them have very conducive, good tax schemes to encourage the companies to pay out more in dividends. The shareholders can get tax benefits by receiving dividends.”
“However, versus other places in Asia – markets like South Korea – I don’t’ think on average companies there are very used to talk about shareholder returns. So you’ll see very little dividend payouts for many of these South Korean companies. Also, in other places such as India where you will see capital usually is very expensive, so when these fast growing companies in India generate any meaningful free cashflow from the business, they tend to retain a large part of that free cashflow to reinvest back into the business.”
“That’s another reason for a pure income investor, you might have a slightly hard time finding a good yield coming from places like India.
Source: Matthews Asia: Why you need Japan for income, FE Trustnet
I agree with Mr.Zhang’s views on country selection. South Korean stocks are generally not good dividend payers. I wrote a detailed article back in January on why investors should avoid Korea when looking for dividend stocks. Simiarly India is another country that can be ignored by dividend investors. India does not have a strong dividend culture and most Indian companies are very stingy in sharing profits with investors. While Korea is problematic due to the dominance of Chaebols, many of the large Indian firms are owned and run by dynastic wealthy families who prefer to maintain control and try to grow their companies as opposed to rewarding shareholders. When companies share the profits with shareholders in the form of dividends they lose control of that cash since the money leaves the company’s coffers and management is somewhat handcuffed from engaging in grandiose behaviors such as making dubious acquisitions, spending on wasteful projects, etc.
Ten stocks from Taiwan, Singapore or Australia are listed below with their current dividend yields for further research:
1.Company: Telstra Corp Ltd (TLSYY)
Current Dividend Yield: 5.58%
Sector:Telecom
Country: Australia
2.Company: National Australia Bank Ltd (NABZY)
Current Dividend Yield: 5.22%
Sector:Banking
Country: Australia
3.Company: Westpac Banking Corp (WBK)
Current Dividend Yield: 5.22%
Sector:Banking
Country: Australia
4.Company: Australia and New Zealand Banking Group Ltd (ANZBY)
Current Dividend Yield: 4.73%
Sector:Banking
Country: Australia
5.Company: DBS Group Holdings Ltd (DBSDY)
Current Dividend Yield: 3.30%
Sector: Banking
Country: Singapore
6.Company: Singapore Telecom (SGAPY)
Current Dividend Yield: 4.43%
Sector: Telecom
Country: Singapore
7.Company: United Overseas Bank Ltd (UOVEY)
Current Dividend Yield: 3.11%
Sector: Banking
Country: Singapore
8.Company: Singapore Airlines Ltd (SINGY)
Current Dividend Yield: 2.56%
Sector: Airlines
Country: Singapore
9.Company:Taiwan Semiconductor Manufacturing Co Ltd (TSM)
Current Dividend Yield: 2.445
Sector: Semiconductors & Semiconductor Equipment
Country:Taiwan
10.Company: Chunghwa Telecom Co Ltd (CHT)
Current Dividend Yield: 4.94%
Sector: Telecom
Country: Taiwan
Note: Dividend yields noted above are as of Apr 16, 2014. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.
Disclosure: No Positions
