KUCHING: Malaysia is now the second largest dividend payout country with 48.9 per cent recorded ratio after Taiwan (83.5 per cent) within the Asia ex-Japan region.
Malaysia was followed by the Philippines with 44.8 per cent, Singapore (43.4 per cent), Thailand (42.9 per cent), Indonesia (40.1 per cent) and Hong Kong (37.4 per cent), all having above-average payouts.
On a fundamental basis, dividends work well in Asia since it aligns the minority shareholder with the majority shareholder such as the family owners, said Markus Rosgen chief Asian strategist at Citigroup Inc.
“The other reason is that as an investment strategy, it is still rather ‘undiscovered’, with only 1.8 per cent of funds investing on an income basis in Asia ex-Japan versus 11 per cent to 18 per cent in developed markets,” he added.
Meanwhile, within Asia, New Zealand and Australia had been the most generous dividend payers, with New Zealand averaging a pay-out ratio of 77.6 per cent and 62 per cent for Australia.
In contrast, Korea was the stand-out country of having pockets sewn shut when it comes to paying dividends.
Although it had the most companies mentioned among the global top companies in all Asia ex-Japan, it had the lowest pay-out ratio with just 18.5 per cent compared with the regional average of 34.9 per cent.
The next lowest pay-out market was India at 25.1 per cent.
“While a higher pay-out will be nice, at least India has the get-out clause of using growth needs and higher return on equity as an excuse for not paying out the capital to shareholders,” said Rosgen.
While the generosity of the pay-out may be questionable among some in Asia, at least the level of participation is quite high. Back in 2000, the percentage of dividend payers stood at 72 per cent and since then had risen to 93 per cent.
In the case of the Philippines, 100 per cent of companies pay dividends, while in Japan and Singapore the level is 98 per cent, and Korea and malaysia still have 97 per cent of corporates which pay dividends.
According to Rosgen, the lowest percentage of dividend paying corporates was Indonesia with 85 per cent and China at 88 per cent.
“However, it gets better when one looks at the percentage of companies which have a dividend yield above their respective country’s bond yield. Back in 2000, bond yields were still considerably higher, the US 10-year stood at 5.7 per cent versis a more 1.6 per cent currently,” he highlighted.
“A rising pay-out has meant that, in Asia ex-Japan, the percentage of companies which have a dividend yield above their respective sovereign has risen from five per cent to 45 per cent now,” he added.
Rongen concluded that growth had tended to be the startegy of choice in Asia ex-Japan.
“When fewer people are chasing the same strategy there is greater room for outperformance.”