Asia’s dividend payouts set for biggest increase in 6 yrs as profits surge

Asia’s dividend payouts set for biggest increase in 6 yrs as profits surge

New Delhi, Nov 20: Dividend payouts by Asia’s biggest companies are poised for their biggest increase in six years as profits surge and pressure grows on firms to be more generous with their shareholders.
Across Asia, dividend payouts in 2017 are expected to grow by 12 per cent year-on-year, a Reuters analysis showed, marking the largest increase in payouts since 2011.
That corporate generosity, driven to some extent by improving economic growth, is only partly reflected in the share price, analysts say. If, as consensus forecasts show, earnings growth stays strong into next year and 2019, there is plenty of room for Asian stock markets to rally beyond current multi-year highs.
“2017 is the year when earnings finally recover after five years of disappointing growth in Asia,” said Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong.
“Accordingly, we see dividends rising, in line with earnings growth.”
The numbers, compiled from Thomson Reuters earnings data, show technology companies such as Taiwan Semiconductor Corp, Samsung Electronics Co Ltd and Sony Corp are expecting record profits and higher dividends this year as the launch of new smartphones drives up demand of memory chips and image sensors. Malaysia’s CIMB Group Holdings Bhd, which announced its second-best quarterly earnings in four years in the June quarter, issued an interim dividend of 1.18 billion ringgit ($281.96 million), translating to a dividend payout ratio of 51.6 per cent of first-half profits.
The analysis covered 1,571 Asian companies each with a market capitalisation of at least $1 billion across 12 markets for which Thomson Reuters has available data on dividend estimates. Dividends grew between 0.5 per cent and 9 per cent between 2012 and 2016.
Across the region, corporate profits are climbing owing to higher commodity prices, a revival in global demand for consumer products and an improvement in bank profits as loan growth soars even as funding costs stay low.
The markets have priced in some expectations of these bumper returns but analysts expect earnings and therefore dividends growth to stay strong even in 2018 and 2019, said Benzimra.
“I don’t think this is really priced into the market,” he said. “If we indeed have this kind of earnings growth, that could lift the market.”
MSCI’s Asia ex-Japan index has risen about 30 per cent this year and is at its highest since 2007.
Grace Tam, a senior market strategist at HSBC Global Asset Management based in Hong Kong, said free cash flows are higher among Asian companies and investors might find themselves surprised by future payouts.