Dollar fluctuations could create volatility for emerging markets assets as the US presidential election draws near, but one region income-hungry investors cannot afford to ignore is Asia Pacific, home to many high-quality companies with the cash flow generation and balance sheet strength to reward shareholders with attractive dividend yields.
A great way to access the compelling dividend story emerging in Asia is the Abrdn Asian Income Fund (AAIF), a core holding for investors seeking diversification through Asian equity exposure.
A near-14% discount to NAV (net asset value), wider than the 12.9% 12-month average, offers a good entry point into a trust with significant re-rating scope, so long as robust performance continues with the NAV total return ahead of the MSCI AC Asia Pacific ex Japan benchmark over five years. Investors are also being paid a bumper 5.5% dividend yield while they wait for strong performance, share buybacks and a recent management fee reduction to help bring in the discount.
Managed by Abrdn’s Asian equities team, the £338.2 million cap targets the income and growth potential of Asia’s most compelling and sustainable companies. The strategy seeks to provide investors with a total return primarily through investing in Asia Pacific shares, including those with an above average yield, with the fund aiming to grow its dividends over time. ‘We want all of the players in our little football team of a portfolio to be generating earnings growth, which supports dividend growth, but we also need that yield factor because we are aiming to grow our fund dividend yield over time,’ says Yoojeong Oh, an investment director on the Asian equities team.
Investors traditionally associate Asia with growth, but this diverse region is an overlooked source of dividends, and this trust allows investors to diversify beyond traditional UK-listed sources of income to a broader set of Asian companies at the forefront of mega trends. The trust seeks out high-quality businesses with strong management teams, ‘people we trust’ says Yoojeong Oh, trading on sensible valuations, and it is notable that the fund is underweight China and India versus its benchmark due to their lesser focus on dividends. Its largest holdings are across Taiwan, Singapore and Australia, which are Asia Pacific’s highest dividend-paying countries.
Top 10 holdings include Taiwan’s TSMC (2330:TPE) and Korea’s Samsung Electronics (005930:KRX) and Australia’s BHP (BHP:ASX). The trust recently initiated a position in Korean memory semiconductor company SK Hynix (000660:KRX), which it views as being geared into the growth of 5G smartphones, structural demand for servers and burgeoning appetite for high bandwidth memory for artificial intelligence (AI) processing.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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