S&P Pan Asia Dividend Aristocrats
Comment of the Day

August 23 2011

Commentary by Eoin Treacy

S&P Pan Asia Dividend Aristocrats

Eoin Treacy's view Periods of market turmoil often instil a new found respect for yield in equity investors. This occasion has been no different. However, there is a clear difference between companies that have high yields and those with a consistent record of increasing their respective payouts. When we find companies that offer both, as well as exposure to the global economy's growth engines, then the odds of having found an attractive opportunity have increased considerably.

S&P defines dividend aristocrats as companies which have a strong record of increasing their dividends year after year. I have posted reviews of dividend aristocrats for the USA, Europe and Canada on successive occasions over the last 18 months. However, it was not previously possible to review the constituents the S&P Pan Asia Dividend Aristocrats Index because they did not make this information public. This has now changed and the constituent data is now freely available via their site.

S&P define an S&P Pan Asia Dividend Aristocrat as a company which has increased its dividend yield every year for the last seven. The list currently includes companies from Japan, Australia, Hong Kong, Singapore, India, Indonesia and Korea. The Index rallied impressively from the early 2009 low and while it has lost momentum somewhat over the last year, its reaction has so far been limited to a similar pullback to that posted from late 2009 to mid 2010. It is now testing the area of the 200-day MA but will need to rally emphatically from current levels to indicate a return to medium-term demand dominance. Here is a chart comparing the performance of the nominal and total return indices which highlights the Index's 3.3% per annum yield.

Here is a table of the Index constituents with their respective yields.

I last reviewed Australian shares in Comment of the Day on August 12th. Of the shares in the S&P Pan Asia Dividend Aristocrat Index, Coca-Cola Amatil (6.16%) has bounced back best over the last two weeks. It needs to hold above A$11 if the medium-term upside is to continue to be given the benefit of the doubt. The majority of other shares have endured significant price deterioration and evidence of support building will be required to confirm a return to demand dominance.

In Hong Kong, Cheung Kong Infrastructure is becoming increasingly overextended relative to the 200-day MA but a clear downward dynamic, held for more than a week or two, would be required to indicate supply side dominance.

In Indonesia Semen Gresik Persero (Building Materials) has lost upward momentum but yields 3.31% and has held its progression of rising lows. A sustained move to new high ground would be required to reassert the medium-term uptrend.

Medium-term downtrends are generally observable among the Indian constituents. ITC (Agriculture) is an exception. It yields 2.19%, and remains in a consistent medium-term uptrend where it has found support in the region of the 200-day MA on successive occasions. Siemens India (.57%) has a relatively similar pattern. While not dividend aristocrats Nestle India and Hindustan Lever also exhibit relatively consistent medium-term uptrends.

The Japanese stock market has been a clear underperformer for much of the last three years. However, upside leaders among the dividend aristocrats include Lawson (Retail 3.96%), Kaken Pharm (3.27%), KDDI (Telecoms 2.55%), Japan Tobacco (2.02%), Nitori Corp (Retail 1.02%), and Uni-Charm Corp (Cosmetics 0.78%).

In Singapore Jardine Matheson has pulled back sharply to test the 200-day MA where it has at least paused. A clear upward dynamic would confirm more than temporary support at the current level.

In Taiwan, Simplo Technology (Electronic Components 2.38%) has a similar pattern to Jardine Metheson above.

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