Asian investors bet on revenue growth rather than return

TOKYO (Reuters) – Investors in Asian stocks are choosing companies and sectors that promise better returns over the long term, ignoring the broader uncertainties surrounding the benefits of the risks badociated with economic growth and global trade this year.

For some long-term investors operating in Asian equity markets, proof of a profound change in the region's culture of accumulating less cash and rewarding investors with higher dividends also a reason to continue investing.

This is happening even as badysts increasingly believe that dividends per share from companies in the Asia-Pacific region, which have already been declining since the middle of 2018, will fall further over the next 12 months relative to those distributed in North America and Europe, according to Refinitiv data.

Analysts also downgraded their dividend forecasts for a larger proportion of companies in the Asia-Pacific region compared to numbers in North America and Europe, according to the data.

For a chart of badysts' per capita earnings forecasts for Asia-Pacific in 2019, click on: tmsnrt.rs/2ErqRA1

For more charts showing more demotions than improvements in dividend per share forecasts by companies in the Asia-Pacific region, click on: tmsnrt.rs/2M1a7Wx

Yet despite these bleak prospects, investors are banking on a shift in corporate culture in Asia, which will push companies to distribute large sums of money.

In fact, given the risks badociated with the US-China trade war weighing on the values ​​of export-dependent economies, such as China, South Korea, and Japan, dividend expectations are one of the few engines of investor optimism in the region.

For a long time, dividends were "something that was a two minute conversation at the end of a one – hour meeting. Now it's number three or four on the agenda for every company we meet, "said Sat Duhra, fund manager at Janus Henderson Investors in Singapore, which invests in high-growth dividend companies. .

Total liquidity and short-term investments of more than 9,000 businesses in the region reached $ 2.84 billion at the end of December versus $ 1.7 billion five years earlier, an increase of 67% , according to Refinitiv data.

The S & P Pan Asia Aristocrats Index, consisting of companies that have a policy of increasing their dividends every year for at least seven years, posted a return of 6.8% this year, compared to 3.2% for a broad index of Asian markets, according to S & P data.

Companies that have recently distributed dividends are now in demand, particularly as the prospect of slowing global growth and lower interest rates is pushing investors to defensive and rewarding stocks.

"Income is really an element that has grown in importance due to the low interest rates we have been experiencing since 2008," said Jim McCafferty, head of Asia-Japan equity research. at Nomura in Hong Kong.

"Given that traditional savings products would be Treasury securities or bank deposits and that base rates stay close to zero, investors need to look for more adventurous ways to generate income."

For companies in the Asia-Pacific region, the median payout ratio, which is the percentage of earnings of a dividend paying company, reached 33% at the end of December, compared to 28% at the end of 2014, according to the Refinitiv data. This compares with 34% for US companies and 27% for European companies at the end of December, according to Refinitiv figures.

Investors attracted by dividend growth are seeing positive prospects in Singaporean banks, Indonesian telecom companies, utilities and infrastructure players in China and Thailand, and in the names of Australian energy.

For a chart of the Asia-Pacific median dividend payout ratio, click on: tmsnrt.rs/2WGBnuf

For a chart of the median dividend payout ratio in Asia-Pacific, click tmsnrt.rs/2W3oBsG.

Companies with a long history of growing dividends and setting aside a larger portion of their dividend earnings are doing well, although they also benefited from favorable macroeconomic factors, such as the recent upturn in rising commodity prices.

For example, Australian mining giant Rio Tinto Ltd's Sydney-listed shares rose 36.1% this year, while those of South Korean smartphone maker Samsung Electronics Co Ltd gained 10.2% over a year earlier. KOSPI stock index platform.

Both companies have paid more dividends in the past year compared to the previous year, while seeing their distribution ratios increase from 67% a year ago to 72% at the end of 2018 and 14%. % at the end of 2018 at the end of 2018.% the previous year, the Refinitiv data showed.