Nicolas Simar, Head of Equity Value Boutique at ING Investment Management, comments: “Over the long term, dividend investing accounts for more than 70% of total real equity returns and some of the most attractive opportunities here can be found in emerging markets. They are widely expected to be the primary driver of global economic growth due to their strong fundamentals. In addition to this, dividend yields in emerging markets are already relatively high and growing faster than those in developed markets.”
In terms of why institutional investors expect more emerging market companies to pay high dividends in the future, the main reason is many are becoming ‘cash rich’ and can afford to do this – the view of 29% of those interviewed.
This was followed by 22% who said improving corporate governance and transparency in the region will fuel a rise in dividends paid, and one in five who believe it is because they are looking to attract more investors.
Some 14% believe the main reason will be because more emerging market companies will be listing and they need to pay high dividends to attract investors.
ING IM’s Emerging Markets High Dividend Equity Fund [2] has returned 7.2% annualized since the inception of the strategy (March 31st 2013) [3]. It invests in stocks of companies located in emerging markets around the world that offer attractive and sustainable dividend yields and potential for capital appreciation.
The strategy combines quantitative screening with fundamental analysis to identify stocks that trade below their intrinsic value and offer an ability to grow their dividend in the future. The fund focuses on finding the strongest dividend payers from a valuation perspective and not the highest yielders.
