One of the few bright spots for equity investors this year is dividend investing, as both high dividend and payout growth strategies, broadly speaking, are outperforming the broader market.
Indeed, S&P 500 payouts are climbing to new highs, underscoring the importance of dividend growth and its benefits as an inflation-fighting tool. Obviously, that’s good news, but investors should not lose sight of the fact that payout growth isn’t solely a domestic phenomenon.
Ex-U.S. payouts are increasing, too, including myriad attractive opportunities in Asia. This could be a sign that the KraneShares S&P Pan Asia Dividend Aristrocrats ETF (KDIV ) qualifies as a well-timed new exchange traded fund; KDIV debuted last month.
KDIV follows the S&P Pan Asia Dividend Aristocrats Index, which is the Asia equivalent of the famed domestic dividend aristocrats indexes that serve as the underlying benchmarks for several well-known ETFs. To qualify for entry into the index, companies must have a minimum dividend increase streak of seven years. There are requirements to enter this club.
“Companies must also have positive earnings and a dividend payout ratio between 0% and 100%. To avoid dividend traps, stocks with an indicated annualized dividend (IAD) yield above 10% are excluded from the index. The S&P Dividend Aristocrats methodology provides a ballast for investors since the ability to consistently grow dividends every year through different economic environments can be an indication of financial strength and discipline,” according to S&P Dow Jones Indices.
While China is the largest emerging markets dividend-payer both in terms of dollars and in terms of the number of dividend-paying companies, the S&P Pan Asia Dividend Aristocrats Index is reflective of other Asia-Pacific payout opportunities.
Those include Australia, which has long sported above-average yields, and Japan. For its part, Japan is fast becoming a shareholder rewards destination, as companies there are boosting both buybacks and dividends after decades of being notoriously tight-fisted with excess cash. In order, Japan, China, Australia, and Hong Kong combine for about 94% of the weight of KDIV’s index. Add to that, KDIV’s index has long sported a yield advantage over the S&P Pan Asia BMI.
“The S&P Pan Asia Dividend Aristocrats has shown considerable yield enhancement over the S&P Pan Asia BMI. Over the full period, the S&P Pan Asia Dividend Aristocrats averaged a 3.32% 12-month trailing dividend yield versus 2.42% for the S&P Pan Asia BMI,” added S&P Dow Jones. “Recently, the yield pick-up has been more pronounced. The difference in yield in 2020 and 2021 was 1.68% and 1.64%, respectively, compared with only 0.9% over the full period.”
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