HK Dividends Fall in Q1

13 undervalued, less uncertain companies offer an attractive forward dividend yield of 4% or above.

Kate Lin 01 June, 2022 | 11:21
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Asia Pacific had a strong start in terms of equity dividends. Dividends derived from the markets grew 8.1% on a headline basis, according to a recent research report by Janus Henderson. While the asset manager suggests that first quarters are typically the ‘quietest quarter for dividends in Asia’, the region managed to maintain dividend payout momentum for four quarters in a row.                                                         

However, according to the report, Hong Kong was one of the few markets that suffered a drop. Compared to a high-single-digit growth on average across the region, Hong Kong company dividends reduced 12.4%, with Hang Seng Bank (00011)’s cut causing the biggest drag. Only one company among the few that pay in the first quarter, Hong Kong-listed Chinese real estate developer Longfor Group Holdings (00960), made an increase.

Dividends are a constant hot topic for our readers. In a time of market volatility, stocks that generate income ensure a margin of safety. Even in these volatile times, companies that return cash to shareholders (and in some cases raise dividends) can be found.

We look at Morningstar data to find strong dividend payers and growers that are also undervalued. At the same time, as we search for sustainable yields, we want to avoid names that do not usually pay a high dividend but emerge as attractive only because of a deep plunge in stock price. The list below excludes stocks that earn a fair value uncertainty rating that is ‘Very High’ or ‘High’. Here is a list:

Investors were spooked by a spate of default cases with Chinese property developers. But Hong Kong real estate firms are believed to be a different case. The search of dividend payers point us to seven property firms, with two of them being REITs. Link REIT 00823 and Swire Properties 01972 stand out with a forward dividend yield of near 5% and a flat year-to-date return. 

Investors should also pay attention to the Cheung Kong family founded by billionaire Li Ka Shing. Two utilities stocks CK Infrastructure Holdings (01038) and Power Assets Holdings (00006) are arms under the household conglomerate name CK Hutchison Holdings (00001).

The last bucket includes two telecom giants, China Mobile (00941) and China Telecom Corp Class H (00728).

Dan Lefkovitz, strategist at Morningstar, reminds yield seekers of the nature of dividend investing. “There's nothing wrong with using dividend-paying stocks and bonds for income, but an investor's top priority must always be total return. That's why it's also worth remembering that at the end of the day, dividend-paying stocks are still stocks.”

Lefkovitz believes that diversification remains an effective means of capturing investment opportunities, reducing volatility, and positioning a portfolio for inevitable bumps in the road.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Champion Real Estate Investment Trust3.57 HKD1.42Rating
China Mobile Ltd48.85 HKD-0.10Rating
China Telecom Corp Ltd Class H2.66 HKD-0.37Rating
CK Hutchison Holdings Ltd52.65 HKD-0.94Rating
CK Infrastructure Holdings Ltd48.75 HKD-0.31Rating
Hang Lung Properties Ltd14.52 HKD0.00Rating
Hang Seng Bank Ltd133.50 HKD-1.11Rating
Henderson Land Development Co Ltd28.75 HKD-1.20Rating
Link Real Estate Investment Trust64.40 HKD1.18Rating
Longfor Group Holdings Ltd36.10 HKD-0.28
New World Development Co Ltd27.35 HKD-1.08Rating
Power Assets Holdings Ltd49.45 HKD-0.10Rating
Sun Hung Kai Properties Ltd93.95 HKD0.37Rating
Swire Pacific Ltd Class A46.15 HKD-2.22Rating
Swire Properties Ltd19.00 HKD0.11Rating

About Author

Kate Lin

Kate Lin  is a Data Journalist for Morningstar Asia, and is based in Hong Kong

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