What are we looking for?
Sustainable dividends from a booming – if sometimes volatile – Southeast Asia.
Prime Minister Justin Trudeau's attendance at the recently concluded Manila summit of the Association of Southeast Asian Nations (ASEAN) highlights the region's promise – despite lingering currency and political instability.
Canadians can buy individual Southeast Asian stocks, but that kind of direct investment adds risk and expense. It's why we think the best way to invest in ASEAN economies is through exchange-traded funds.
Our search looked at the top holdings for each ETF. We then applied our TSI Dividend Sustainability Rating System to those stocks. It awards points based on key factors:
- One point for five years of continuous dividend payments – two points for more than five.
- Two points if it has raised the payment in the past five years.
- One point for management’s commitment to dividends.
- One point for operating in non-cyclical industries.
- One point for limited exposure to foreign currency rates and freedom from political interference.
- Two points for a strong balance sheet, including manageable debt and adequate cash.
- Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments.
- One point if the company is a leader in its industry.
Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of the Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, the Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated six U.S.-listed ETFs focused on Southeast Asia. Many of their stocks offer consistent dividends, or distributions, and bright prospects. (Five are BlackRock-managed iShares, which reflects the limited number of funds covering the region.)
The Singapore ETF taps a buoyant export market and high-tech corridor. Malaysia has diversified industries, while the Thailand ETF gains from manufacturing and tourism. Despite political volatility, the Philippines continues its rapid shift from agriculture to manufacturing and services. Indonesia, on the other hand, prospers from natural resources and tourism. The Vietnam ETF earns our "below average" rating given the predominance of state-owned enterprises, but it's steadily liberalizing its economy. All six of these ETFs appear in the accompanying table.
We advise investors to do additional research on any investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
Select exchange-traded funds covering Southeast Asia
|Ranking*||ETF||Ticker||Dividend Sustainability Rating||Assets ($ Mil U.S.)||MER %||Div. Yield %||Points|
|1||iShares MSCI Singapore Capped ETF||EWS-N||Above Average||576.8||0.48||3.8||9|
|2||iShares MSCI Malaysia ETF||EWM-N||Above Average||440.2||0.48||5.0||7|
|3||iShares MSCI Thailand ETF||THD-N||Average||402.1||0.63||2.5||6|
|4||iShares MSCI Indonesia ETF||EIDO-N||Average||494.6||0.48||1.3||5|
|5||iShares MSCI Philippines ETF||EPHE-N||Average||178.3||0.64||0.6||5|
|6||VanEck Vectors Vietnam ETF||VNM-N||Below Average||295.9||0.66||2.0||3|
Source: Dividend Advisor
* Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.