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Growing Asian dividends help trusts deliver consistent income

Five Asian equity trusts have increased their dividends for 10 or more consecutive years
March 21, 2019

Every year The Association of Investment Companies (AIC) publishes a list of the investment trusts that have increased their dividends for 20 or more consecutive years – its dividend heroes. But, as we reported last week, this misses out strong dividend-paying trusts that have been launched more recently. However, the AIC highlights some of these in its annual list of next-generation dividend heroes – trusts that have raised their dividends for between 10 and 20 consecutive years.

The AIC has recently updated this annual list and nine out of the 22 trusts on it focus on UK equities, a market that has historically been one of the best dividend-paying areas. These include UK Equity Income sector trusts such as Perpetual Income and Growth Investment Trust (PLI), which has grown its dividend for 19 consecutive years, and Aberdeen Standard Equity Income Trust (ASEI) with 18 consecutive years of increases.

But there are also five Asian equity funds on the list, including new entrant Aberdeen Asian Income Fund (AAIF), which has raised its dividend for 10 years in a row. There are not yet any Asian trusts on the AIC's list of trusts that have increased their dividends for 20 or more consecutive years.

Asian equity investment trusts benefit from features common to all trusts, such as being able to keep up to 15 per cent of the revenue they receive in a reserve, which they can draw on to help raise dividends in years when income from their investments is not enough. But they are also benefiting from increasing dividend payments in Asia. 

Yoojeong Oh, manager of Aberdeen Asian Income Fund, said: “A dividend-paying culture in Asia is certainly developing. More and more companies are recognising the importance of paying an annual dividend to shareholders and Aberdeen Asian Income’s dividend has more than doubled since it was launched in 2005. During this time we’ve also been able to build cash reserves for that 'rainy day'. Even during the depths of the global financial crisis in 2008, we were able to maintain the level of income we paid to our shareholders. Generally we are seeing governance among Asian businesses moving towards international standards, making balance sheets more efficient and shareholder returns more attractive.”

Aberdeen Asian Income paid dividends worth 9.15p in respect of its 2018 financial year, up from 9p in 2017, and had a yield of 4.4 per cent at the end of February.

The dividend yield on MSCI AC Asia Pacific ex Japan index is currently 2.6 per cent and lower than the FTSE All-Share’s 4.5 per cent, according to Bloomberg data. But it is comparable with MSCI World‎'s 2.5 per cent and ahead of the S&P 500's 1.9 per cent. And within Asia and Australia there are individual companies paying good dividends, and underlying dividend growth in 2018 for this region was 8 per cent – not far behind the UK's 8.8 per cent, according to the Janus Henderson Global Dividend Index.

A number of funds have been launched or changed their mandate to focus on Asian equity income over the past two decades. These include five Asia Pacific ex Japan investment trusts, two of which feature in the next-generation dividend heroes list. Schroder Oriental Income Fund (SOI), one of our IC Top 100 Funds, launched in 2005, has increased its dividend for 12 consecutive years and had a yield of 3.9 per cent at the end of February 2019. And Henderson Far East Income (HFEL), launched in 2006, has increased its dividend for 11 consecutive years and had a yield of 6.4 per cent at the end of February. 

Listen to our interview with Henderson Far East Income's manager

But Asian equity income funds include emerging market investments, so are higher risk and potentially more volatile than funds focused on developed markets. Aberdeen Asian Income and Schroder Oriental Income, for example, each have about 10 per cent of their assets in China and 7 per cent in Thailand. If you do not have a high enough risk appetite for one of these, global equity income funds, which spread their risk across a number of mostly developed markets, could be a better way to get exposure to overseas equity income. Options include Artemis Global Income (GB00B5N99561) and Fidelity Global Dividend (GB00B7778087).

 

Trusts that have raised their dividends for at least 10 years

TrustSectorNo of consecutive years dividend increasedDividend yield at 28/02/19 (%)
Perpetual Income and Growth Investment Trust (PLI)UK Equity Income194.58
Aberdeen Standard Equity Income Trust (ASEI)UK Equity Income184.88
Athelney Trust (ATY)UK Smaller Companies163.96
TR European Growth Trust (TRG)European Smaller Companies162.53
BlackRock Smaller Companies Trust (BRSC)UK Smaller Companies152.11
BlackRock Throgmorton Trust (THRG)UK Smaller Companies152.04
Establishment Investment Trust (ET.)Flexible Investment152.91
Henderson Eurotrust (HNE)Europe152.94
Henderson Smaller Companies Investment Trust (HSL)UK Smaller Companies152.62
Aberdeen New Dawn Investment Trust (ABD)Asia Pacific - Excluding Japan141.86
Artemis Alpha Trust (ATS)UK All Companies141.79
Murray International Trust (MYI)Global Equity Income144.39
BlackRock Greater Europe Investment Trust (BRGE)Europe131.73
Edinburgh Investment Trust (EDIN)UK Equity Income134.37
Witan Pacific Investment Trust (WPC)Asia Pacific - Including Japan131.74
Henderson European Focus Trust (HEFT)Europe122.74
Schroder Oriental Income Fund (SOI)Asia Pacific - Excluding Japan123.9
Henderson Far East Income (HFEL)Asia Pacific - Excluding Japan116.41
HICL Infrastructure Company (HICL)Sector Specialist: Infrastructure114.83
International Public Partnerships (INPP)Sector Specialist: Infrastructure114.54
Standard Life UK Smaller Companies Trust (SLS)UK Smaller Companies111.63
Aberdeen Asian Income Fund (AAIF)Asia Pacific - Excluding Japan104.44

Source: AIC/Morningstar