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Newton’s Pidcock: 'stingy' South Korea is cheating on dividends
by Emma Dunkley on Apr 26, 2012 at 07:01
Jason Pidcock, manager of the £1.8 billion Newton Asian Income fund , is looking to companies in Australia and East Asia for robust dividends because firms in South Korea are 'stingy' when it comes to redistributing capital.
The fund, which has significantly outstripped its benchmark and delivered 103.7% over three years versus 59.3% by its comparator index, invests in companies in the Asia ex-Japan region which offer solid dividends and the potential for rising shareholder payouts and growth in valuation.
Pidcock (pictured) said that companies in Asia now account for a greater portion of companies listed globally that offer the highest yields.
He said in 1995, of the companies listed worldwide and yielded more than 3%, 16.3% of these were in the Pacific ex-Japan region while the UK accounted for 20%.
The tables have now turned, the manager pointed out, with companies in Pacific ex-Japan last year accounting for 28.6%, while the UK only represents 7.3%.
Pidcock said that some of the best companies in terms of regional exposure are in Singapore, South East Asia and North East Asia, all of which he is overweight, while he has an underweight to South Korea.
‘In North East Asia, we like Taiwan. Companies here have a very healthy attitude to dividends,’ he explained.
‘We have a big black mark against South Korea – they’re stingy on dividends and don’t understand their commitments to shareholders.'
If South Korea had a normal dividend pay-out ratio, of around 40% which is the Pacific ex-Japan norm, then its companies would not have such high headline growth, Pidcock argued.
‘It is because they have been cheating with their dividends. If they had a normal dividend policy they couldn’t invest enough to grow their profits as they are. if they have high dividends, they can’t invest in as much,’ he said.
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