Investors looking for growth opportunities in Asia can consider quality dividend growth ETF strategies to better access the region.
During the recent webcast, Look no further than Pan Asia for growth and revenue, Brendan Ahern, chief investment officer at KraneShares, explained that the S&P Dividend Aristocrats Index Series focuses on companies that have consistently increased their dividend payouts on an annual basis over an extended period. The Dividend Growth strategy can outperform during periods of rising rates, potentially provide better ability to weather market turbulence, provide an attractive source of growing and sustainable income, and focus on quality companies with strong balance sheets. solid.
Ahern noted that Asia has overtaken the Americas and EMEA (Europe, Middle East and Africa) in terms of GDP growth in recent decades, which could offer investors the opportunity to browse a growing region. fast. After years of growth, Asian stock markets are now the second largest in the world after the Americas.
When it comes to investing in Asia, Ahern argued that investors should focus on dividend producers today.
“During a period of acute monetary policy tightening across much of the Western world, major Asian central banks remained relatively more accommodative, which we believe could lead to higher equity returns relative to the US. “, Ahern said. “Furthermore, lower inflation in Asia, especially China, compared to Western countries may make corporate dividend policies more sustainable.”
For example, the People’s Bank of China (PBOC), China’s central bank, lowered its policy rates in 2022, including the Lending Prime Rate (LPR), which helps set mortgage rates, the Medium Lending Facility term (MLF) and the reserve requirement ratio (RRR) for banks. China’s inflation rate in August 2022 was 2.5% compared to 8.3% in the United States
Ahern explained that dividend growth refers to the consistent increase in dividend payments over consecutive years, focusing on repeated increases, not necessarily a high dividend. Decomposing a company’s sustainable growth rate helps uncover the drivers of dividend growth. A company’s sustainable growth rate is the rate at which profits, and therefore potential dividends, can theoretically grow indefinitely if the company’s debt ratio is unchanged and no new shares are issued. By understanding that dividend-growing companies have increased their dividends at a sustainable rate, which may allow them to do so over several years, an investor can assume that the return on equity has always been high for these companies. Additionally, a high return on equity implies that these companies exhibited a preferable combination of profit margins, asset turnover, and financial leverage.
Henry Greene, investment strategist at KraneShares, added that strong dividend growth is usually a positive signal from company insiders of confidence in the company’s future, as well as a pro- shareholder. He argued that companies that raised or initiated dividends have historically shown superior performance and lower volatility. The contribution of dividend income to the total return of the S&P 500 has been significant and cannot be ignored. Additionally, the lower levy can help prevent investors from making rash decisions about their portfolios to achieve their investment goals.
Greene also pointed out that the S&P Pan Asia Dividend Aristocrats Index has historically had a higher overall dividend yield than its broad benchmark, the S&P Pan Asia BMI Index, and higher dividend growth across the board. its constituents. Additionally, the S&P Pan Asia Dividend Aristocrats Index offers a 2% higher dividend yield and a P/E ratio over 30% lower than the S&P Pan Asia BMI Index.
“We believe its strong performance is a testament to the fact that dividend-growing companies are companies with enduring investment value, especially for investors with long-term horizons,” Greene said.
To help investors access this market segment, KraneShares recently launched the KraneShares S&P Pan Asia Dividend Aristocrats ETF (KDIV), which provides access to the S&P Dividend Aristocrats methodology applied to the Pan-Asian region, one of the fastest growing regions in the world. The S&P Pan Asia Dividend Aristocrats Index includes exposure to China, Japan, Australia and other Asian companies that have paid and increased dividends over an extended period.
“We believe dividend growth is an attractive investment theme that should be considered when constructing a portfolio,” Greene said.
“Investors looking for opportunities to gain or replace exposure to Asian equities by focusing on high-quality companies dedicated to returning money to their shareholders should consider incorporating dividend growth strategies into their wallets.”
Financial advisors interested in learning more about the Asia Dividend Growth Strategy can watch the webcast here on demand.
#Dividend #Growth #ETF #Strategy #Targeting #Asian #Markets