Percentage of emerging market firms paying dividends rises
Since the turn of the century the number of emerging market companies paying dividends has risen at a markedly faster pace than those of the developed world, new research has claimed.
The report from S&P Dow Jones Indices found the percentage of companies that returned cash to shareholders in developed markets varied at between 60 and 70 per cent.
But across emerging markets the level of dividend-paying corporations has steadily increased from 60 per cent in 1998 to between 70 and 80 per cent last year.
Aye Soe, senior director, global research and design at S&P Dow Jones Indices said: “In the past, investors have turned to emerging markets for growth opportunities rather than yield.
“However, as emerging economies mature, two important developments – a rising percentage of companies paying dividends, as well as higher payout ratios than developed markets – have made enhanced yield strategies possible for income-seeking global investors.”
The study also found the aggregate annual dividend payout ratio, which indicates the percentage of earnings returned to shareholders, had been climbing steadily in emerging markets, while it had been falling across developed world firms.
The analysis showed there had been a shift in which areas within emerging markets paid out the most in dividends.
Latin American companies accounted for 35 per cent of payouts in 1998, but that has now fallen to 19 per cent, while the percentage of payouts from firms in Asia-Pacific and within Europe, Middle East and Africa has increased.
The report also highlighted that across the 16 years analysed, emerging market dividend payers delivered significantly higher returns with lower risk, compared with the non-payers and the overall market.
Recent years have witnessed a plethora of yield-hungry investors seeking more exotic destinations in a bid to boost their income, which in turn has seen a rise in the number of new emerging market equity income funds on offer.
However, research from Investment Adviser found that the highest-yielding emerging market shares had underperformed recently, as high-divided-paying shares were hit dramatically by the news that the US central bank was ending its quantitative easing programme.
Of the seven funds with an explicit income focus, only Somerset Emerging Markets Dividend Growth beat the Investment Association Global Emerging Markets sector average, or the MSCI Emerging Markets index, from the start of July 2013 to February 1 2015.
