For those averse to cliché, the expression ‘search for yield’ will have become far too familiar over the last seven years. But there is a good reason for that — investors have been starved for too long of decent opportunities to generate returns.
Record low interest rates and a rash of bond purchases by major central banks — designed to stimulate investment and consumption and prevent any number of supposedly imminent emerging market debt crises — have depressed bond yields and channelled cash into risky markets and racier stocks.
That in turn, has pushed down yields in those markets, meaning the fund flows into emerging markets are exacerbating a problem they were meant to solve.
In this context, it is unsurprising that asset management houses are busy promoting their high-income equity funds. Nor should anyone be shocked at the rampant competition among debt capital market bankers for emerging market mandates, something that has pushed down fees and ensured crowded bookrunner lists.
But as detailed in a recent FinanceAsia feature on the woes of private banks a prolonged period of low rates and volatile stock markets has not just made Asia’s wealthiest people search for yield. It has also made them search for safety.
This is perhaps why the region’s mega-rich opted to increase their dividend payments during the research period for FinanceAsia's annual rich list, rather than plough money back into their businesses.
During the 12-months from 1 July 2015 to 30 June 2016, Asia’s tycoons paid themselves $18.027 billion from their publically-listed companies, up from $17.504 billion a year earlier.
The 3% increase might appear unimpressive compared with the 25.6% jump in the previous period, but any admiration for their restraint should be tempered by other statistics which suggest rather less prudence.
The mean dividend pay-out ratio by the top 100 family firms grew from 35% in 2014 to a whopping 52% in 2015 and the median pay-out ratio from 25% to 34%. The number of companies with pay-out ratios of more than 100% rose from six to 17, and there was also an increase in the number that paid dividends despite posting negative earnings.
In a low yield environment and amid weak or volatile local stock markets, many tycoons seem to have rewarded themselves and other shareholders with generous cash payments, rather than reinvesting surplus profits into their own businesses.
Li Ka-shing was a notable exception and did not receive a special dividend. Known as “Superman” in his native Hong Kong, the patriarch of conglomerate CK Hutchison is Asia’s richest person as measured by net worth according to Bloomberg and Forbes, and has been for several years.
He has also topped the FinanceAsia Rich List, which focuses solely on received dividend income, from the list’s inception. Until this year, that is. For the first time, he ranks only third.
Tomorrow: We reveal which veteran Hong Kong tycoon knocked Li off the top spot.
| How we prepare our rich list |
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FinanceAsia analyses the publicly-listed assets of Asia ex-Japan’s leading business families and aggregates the dividends paid to them through their shareholdings or to their trusts or charitable foundations. This methodology provides a more dynamic picture of wealth in the region than can be achieved by estimates of net worth, but clearly underestimates the fortunes of individuals and families whose wealth is mainly derived from non-income earning or wholly private assets. We identify a large universe of companies with large or controlling shareholders and gather information on ownership stakes and dividend payouts based on statements on stock exchanges, news wires and, in the first instance, declarations made in annual reports. Some holdings are opaque because of complex cross-shareholding structures, so there are inevitable instances of under-reporting of some tycoon’s wealth.
There is also a close relationship between families’ net worth (for instance, as calculated by Bloomberg and Forbes) and the dividend income earned from the public companies they control. Clearly, there are some distortions caused by exclusively focusing on public companies — with the most glaring perhaps being Jack Ma, whose Alibaba hasn’t yet paid a dividend, But dividend pay-outs provide an accessible and convenient way of measuring wealth that mirrors families’ asset values and reflects a trend towards listing companies as a new generation of managers succeed founding entrepreneurs. |
