Yoojeong Oh, manager of Abrdn Asian Income Fund (AAIF ), identifies the factors behind the region’s profusion of growth companies paying good dividends. 

This is the first excerpt from our virtual event last week with the £335m investment trust. You can also watch the entire ‘Big Broadcast’ featuring all of Oh’s presentation and her answers to questions from Citywire’s Gavin Lumsden and the audience of investors.

Can’t watch now? Read the transcript

Yoojeong Oh:

GDP growth forecasts for the region is sitting above 5% on average, for many of the markets in the region and Asia is forecast to be the largest contributor to global GDP for the next couple of decades, as you can see here on the right. Did you know that the focus on dividends in the region is also growing? And already, more than half of the companies in the APXJ [Asia Pacific ex-Japan] region are yielding more than 2.5% in dividends.

The next slide shows that dividend reinvestment in fact, shown here in this light turquoise colour, now makes up more than half of the total returns generated from investing in the Asia Pacific region. We can see here, how over the last two decades, that dividend component has grown from almost nothing to being really quite meaningful today.

I think again, this highlights the importance of dividend growth being sustainable in the region over the coming years as well. On the left-hand side here, you’ve got a chart that shows you balance sheet gearing for different regions across the world. Asia, you can see, is towards the bottom-end of the chart shown again, in that light turquoise colour. Balance sheets here, are much stronger. Particularly relative to the balance sheets you find elsewhere in the US and Europe, for example. Strong balance sheets provide flexibility for company management to run their businesses through different market cycles. It gives them choices so they can invest in growth, or they can choose to pay dividends to shareholders.

On the right-hand side, you get a sense of how strongly funded these dividends are as well. This captures the free cashflow generation that covered that dividend and buyback payouts that corporates are making here in Asia. You can see that for the last couple of years, the company strength in terms of their ability to generate cash to cover those dividends, again, has been very strong.