Mr Moonen notes the structural shift among Japanese companies that is placing emphasis on creating shareholder value has helped increase dividend payouts, as has the fact that, historically, payout ratios have been low.
“Something that will also help Japanese payouts is that Japanese companies, relative to their US or European counterparts, have a lot of cash and are generally underlevered, so they have quite a lot of room on their balance sheets to do like US companies have done over the past couple of years, what I would call some financial engineering by trading debt for equities,” he says.
Asia-Pacific ex Japan is also gaining a reputation for delivering equity income, with several Asian income funds now available to UK investors. Jason Pidcock, manager of the Jupiter Asian Income fund, which launched in March, believes there are many companies with a long track record of paying dividends in this region. Speaking to Investment Adviser earlier in the year, he suggested India and South Korea are the only exceptions, and highlighted companies in the Philippines have lower yields but offer the opportunity for dividend growth.
Annual dividends in this region were down by 5 per cent to $110.3bn in 2015, with headline growth hit by weaker exchange rates, according to Henderson.
Differentiating between those countries with high-dividend payouts and those with the potential for dividend growth over the longer term is important for global equity income investors.
Mr Moonen cites Europe as an example: “At first sight, you have quite an attractive dividend – almost 3.5 per cent. But I see two headwinds for that: one is low profit growth; this is what we expect from the eurozone – at least for this year and maybe also 2017. Second, the payout ratio for eurozone companies is almost 60 per cent, meaning there is almost no room for eurozone companies to increase their dividends above the level of earnings growth.”
Ellie Duncan is deputy features editor at Investment Adviser
