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What are we looking for?

Sustainable Asian dividends for China-skittish investors.

The screen

Investors apprehensive after weeks of Hong Kong protests may consider giving up on Asia’s growth prospects. However, there are lots of expanding markets outside of China and Hong Kong in Southeast Asia.

That region’s burgeoning middle class remains its long-term catalyst for economic growth. Neither the Sino-U.S. tariff war nor the tumult in Hong Kong is likely to change that. Both factors could, in fact, spur development as investment dollars look for alternatives to China.

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Our search started with a look at the holdings of the top regional exchange-traded funds – we see ETFs as the best way for Canadians to invest in the region.

We then applied our TSI Dividend Sustainability Rating System. 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 an industry leader.

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 Southeast Asian names. Like the others on the list, iShares MSCI Malaysia ETF holds many dividend-paying companies with strong outlooks; iShares MSCI Thailand ETF taps rising manufacturing and tourism, while Vietnam, as represented by VanEck Vectors Vietnam ETF, is a prime low-cost destination for new manufacturing plants. (Note: The fund’s “below average” rating reflects the predominance of state-owned enterprises.)

The Philippines, as represented by iShares MSCI Philippines ETF, is also shifting from agriculture to manufacturing and services. The iShares MSCI Singapore ETF draws on strong financial and property markets that may get an added boost from decamping Hong Kong investors. Indonesia’s tourism and industrial sectors continue to spur gains for iShares MSCI Indonesia ETF.

We advise investors to do additional research on any investments we identify here.

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Ranking*Exchange-traded fundTickerDiv. Sustainability RatingPointsDiv. Yield (%)MER (%)Assets (US$ Mil.)1Y Total Rtn. (%)Recent price (US$)
1iShares MSCI Singapore ETFEWS-AAbove Average93.90.47549.0-4.122.95
2iShares MSCI Malaysia ETFEWM-AAbove Average73.70.47400.8-15.127.82
3iShares MSCI Thailand ETFTHD-AAverage62.30.59455.4-1.588.41
4iShares MSCI Indonesia ETFEIDO-AAverage51.80.59388.04.124.55
5iShares MSCI Philippines ETFEPHE-AAverage50.80.59213.25.733.80
6VanEck Vectors Vietnam ETFVNM-ABelow Average30.80.68456.1-4.315.85

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.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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