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Want More Dividends? Keep Investing in Asia

Dividends are like the gift that keeps on giving. Receiving “free” money for essentially owning shares. What’s there not to like? And for those of us investing for the long term, dividends can be reinvested and the compounded returns can just keep growing into the future. So for investors looking to tap into dividend opportunities, besides the usual stalwarts in Singapore such as banks and REITs, where should one look?

As it turns out, you don’t need to look far beyond the shores here because companies within Asia are leading the way globally in terms of raising dividends. Janus Henderson, an asset manager, has compiled a “Global Dividend Index” that tracks dividend payouts and growth (using 2009 as a base year) throughout the world. Let’s take a closer look at how Asia fared in 2018.

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Strong Asian dividends

The Asia Pacific ex Japan region showed solid underlying dividend growth of 8.0% in 2018 with the total in dividends paid out reaching US$150 billion across the five countries covered; Australia, Hong Kong, Taiwan, South Korea, and Singapore. What is perhaps less well-known is that Hong Kong companies were the second-largest payers in the region (behind Australia) and forked out US$47.8 billion in dividends to shareholders. In Hong Kong, similar to Singapore, there is no withholding tax on dividends – for locals and foreigners alike – while dividend income is also 100% tax-free for residents.

Singapore, though, came out showing strong numbers as underlying growth in dividends here reached 36.2% in 2018 (mainly helped by a special dividend from leading bank DBS Group Holdings Ltd (SGX: D05). What I found more interesting is that no Singapore company covered by the index cut its payout – testament to the strength of the dividend culture in Singapore. More broadly, the chart below shows how strong the region has continued to perform; coming out on top (and just ahead of North America in second spot).

Source: Janus Henderson Global Dividend Index

Future dividend opportunities

For anyone investing for dividends, the source of future income streams is just as important. And that’s what I found most interesting about the 2018 Global Dividend Index. It’s where the next “Dividend Champions” will come from. We all know certain sectors, like banks and telcos, are reliable dividend payers.

But technology stocks have always been viewed through the prism of “growth”. This can probably start changing given how many names in the technology sector possess all the required traits of being future Dividend Champions. The growth in the below chart shows just how far the sector has come in terms of paying out dividends.

Source: Janus Henderson Global Dividend Index

Invest for dividends

Dividend investing is here to stay and these numbers prove how far Asia has come as a region in paying out dividends to shareholders. The report concluded by saying that “Dividends are much less volatile than earnings, so we remain optimistic on the prospects for income investors”. For those investing in Asia and looking for dividends, the future looks bright.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Tim Phillips does not own shares in any companies mentioned. The Motley Fool Singapore has recommended shares of DBS Group Holdings Ltd.