ASIA - Asian stocks are increasingly offering both share price growth and dividend income, Newton believes.
Newton, part of BNY Mellon Asset Management, said companies in Asia ex-Japan are more able to pay a dividend now because they cut expenditures during the financial crisis.
Head of the Asian equities Jason Pidcock said: "Some investors question equity income investing in Asia, pointing to value traps where capital gains are muted and yields are the biggest contributor to returns. However, we don't see this as being the case. The reason for Asia's current dividend ‘sweetspot' is that the companies which dramatically cut their capital expenditure during the global financial crisis have kept this expenditure low.
"We are reasonably confident about the sustainability of these dividends, as well as the prospects for dividend growth. Strong earnings growth alongside stable pay-out ratios means that continued dividend growth can be achieved."
Meanwhile, Pidcock believes Asian companies outside of Japan are also well-placed to cope with inflation for the same reasons which made dividend payments possible; namely strong balance sheets and low gearing levels.
"Countries across the region have been tightening monetary conditions to fight inflation, whether it is through currency appreciation, increased reserve ratios or with more traditional means such as interest rate hikes," he said.
Pidcock added that during inflationary periods companies are arguably more likely to pay cash dividends as the value of holding cash is eroded by higher prices.
"Asia ex-Japan companies are more likely to return this cash in the form of dividends rather than share buybacks," he said.
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