Ten years ago, Asian equities paid pitifully low dividends following the bull market in the late 1990s. But that’s all starting to change as many markets in the region now offer higher dividend payouts than the S&P 500 and many European equity markets…

Asia, unlike major Western markets, already suffered from an economic depression in 1997-1998 as country after country was sucked into a massive currency and debt crisis smashed into the region.

Asia’s quick response to the crisis – mainly thanks to China – combined with easy credit financing from the West helped to lessen the severity and duration of the blow.

Currently, the FTSE Asia-Pacific Large-Cap Index (excluding Japan) yields 3.8% while the Tokyo Nikkei yields 2.7%. Both sectors yield more than local government bond markets.

The S&P 500 Index currently yields 3% or slightly below the yield on benchmark ten-year Treasury bonds.

Amazingly, Japanese stocks barely yielded 1% for years until the Nikkei began to hemorrhage starting in 2004. Since then, many Japanese large and small-cap companies have boosted dividends over the last five years, including share buybacks.

Some world-class companies in Japan continue to pay attractive dividends, including Canon (3.4%), Nintendo (5.5%), Nippon Oil (3.6%) and Takeda Pharmaceuticals (4.8%).

What’s truly amazing is how for many decades the United States continued to raise dividend payouts while emerging markets paid little or nothing to shareholders. Now that trend is changing amid the worst credit deflation in 75 years…as banks and other companies chop or eliminate dividends to conserve cash.

Dividends in the MSCI Asia Pacific Index are derived from companies in 14 countries with the top ten dividend-paying stocks accounting for about 20% of total dividends paid. In contrast, the top ten dividend stocks in the S&P 500 Index accounted for almost 33% of all dividends paid by that index in 2007.

According to research compiled by the Matthews Asia Pacific Equity Income Fund, between 2002 and 2007 dividends paid by the constituents in the MSCI Asia Pacific Index grew at a compounded annualized rate of 24% compared with 10% for the S&P 500 Index. That trend is accelerating since 2008 as Asian stocks maintain or boost payouts while American companies reduce or eliminate them altogether.

At some point in the future, it’s inevitable that currencies in Asia will be revalued vis-à-vis the American dollar. That makes dividend investing in the Pacific even more compelling as the total return equation grows more rewarding for long-term investors.

Source:  Increasing Dividends, Higher Total Return Mean Asian Equities Might Be Worth a Look