With global interest rates likely to remain low for some time yet, income-producing assets continue to see strong demand from investors. The number of companies across the globe opting to pay dividends has increased significantly over the years, to the benefit of income seekers.
The potential for high dividend growth across the Asia Pacific region is particularly compelling, according to fund manager Michael Kerley. Korea, for example, recently announced plans to penalise companies for hoarding excess cash on their balance sheets. Elsewhere the emphasis of reform in China's state-owned enterprises has been to refocus management towards shareholder returns. The Henderson Asian Dividend Income Fund, managed by Michael Kerley, could be poised to benefit.
The manager is currently avoiding many of the traditional higher-yielding sectors such as utilities, consumer goods and healthcare, where he suggests valuations are at all-time highs. Instead he favours areas he believes represent better value. This has led to a bias towards domestically-focused businesses that are more sensitive to fluctuations in the economic cycle, with an emphasis on those with strong dividend growth prospects.
He is currently finding value in areas such as property, which Michael Kerley believes could benefit from lower interest rates. Elsewhere, in the technology sector, he holds Casetek, a Taiwanese manufacturer of high-end casing for mobile products such as smartphones and tablet computers. He expects the company to benefit as demand grows to protect and prolong the lifetime of mobile gadgets. The company currently yields 5.1%, though this will vary over time.
Michael Kerley has also invested in a number of telecoms businesses where he believes rising data volumes will drive earnings and dividend growth. Examples of companies held are SK Telecom in Korea, HK Trust in Hong Kong and Intouch in Thailand, all of which have performed well over the manager's holding period. This fund currently operates a relatively concentrated approach with around 60 holdings which allows each holding to have a significant impact on performance but this this is a higher risk approach.
Our view on this fund
Michael Kerley has managed the Henderson Asian Dividend Income Fund since November 2009 over which time it has grown by 52.0%, meaning it has underperformed the benchmark return of 55.0%, though it has outperformed the sector average return of 50.2*%. Please remember past performance is not an indicator of future performance. He has also managed an offshore version of the fund since October 2006 and has prior experience managing higher risk emerging markets equities.
|Annual percentage growth|
| Mar 10 -
| Mar 11 -
| Mar 12 -
| Mar 13 -
| Mar 14 -
|Henderson Asian Dividend Income||3.4%||5.2%||16.3%||-12.7%||17.3%|
|MSCI AC Asia Pacific ex Japan||10.5%||1.4%||11.1%||-11.4%||19.5%|
|IA Asia Pacific Excluding Japan||10.2%||0.5%||10.5%||-10.4%||18.1%|
Past performance is not a guide to future returns. Source: Lipper IM* to 02/03/2015
This adventurous fund currently yields an attractive 5.1% (variable and not guaranteed). While Michael Kerley is an experienced Asian and emerging markets investor, we feel there are other managers investing in this area with stronger track records and stock picking ability. The fund, therefore, does not currently feature on the Wealth 150 list of our favourite funds across the major sectors.
Please note the fund's charges can be taken from capital, which can increase the yield but reduce the potential for capital growth.