Japan equities boast strong dividend growth in Q2

22 August 2014   Category: News, Asia, Global, Japan   By Derek Au

Japanese corporates posted the strongest dividend growth worldwide in the second quarter, after previously lagging behind their global counterparts, a report said.

According to a study into global dividend trends by Henderson Global Investors (HGI), Japanese pay-outs grew 18.5% year-on-year to reach US$25.2 billion in the previous quarter. They were closely followed by 18.2% growth in Europe ex UK; 11.8% in North America; and 10.7% in Asia Pacific ex Japan. On a worldwide basis, dividends surged 11.7% to a record $426.8 billion, mainly driven by the momentum in developed markets.

The report said that weakness in the yen made it difficult for Japanese companies to grow dividends in dollar terms, with $8.5 billion being wiped out as a result of the fall in the currency over the last 18 months. However, it suggested that this effect is now dissipating, given that the yen has stabilised. The report also attributed the growth of dividend pay-outs to the performance of Japanese consumer stocks.

In Asia Pacific ex Japan, dividend growth has been less impressive as a result of weak currencies and slowing economic growth. The report said the 10.7% rise fell short of expectations, despite big special dividends from billionaire Li Ka-shing’s Cheung Kong and Hutchison Whampoa. These amounted to $5.9 billion in total, and were the result of a sale of around a 25% stake in retailer A.S. Watson. Excluding special dividends, dividend pay-outs in the region fell 5%.

Commenting on the lacklustre performance in the region, Michael Kerley, fund manager at HGI, said: “Whilst a number of one-off events impacted Asia Pacific dividend growth in Q2, the changing political and economic landscape in 2014 is positive for income investors in Asia. Korea, for example, is enacting regulation to increase pay-out to investors and Chinese state owned enterprises reform has the potential to steer companies towards investor friendly initiatives.”