Investing in Asia for Dividend Income
by Jesper Madsen, CFA and Charles Rotblut, CFA
Jesper Madsen manages the Matthews Asia Dividend Fund MAPIX and the Matthews China Dividend Fund MCDFX. I spoke with him in late July about dividend investing in Asia.
—Charles Rotblut
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Charles Rotblut (CR): In your Asian funds, what guides your allocation decisions?
Jesper Madsen (JS): For the Asia Dividend Fund, it is really a matter of saying, “What is the bottom-up telling us, in terms of the availability within the universe?”
Maybe I can take a step back and lay out the broad universe for you, because it also helps explain how we construct a portfolio. In Asia, the dividend yield for the Asia Pacific region is sitting around 3%. That’s inclusive of Japan and using the MSCI All Country Asia Pacific Index as a proxy for the general market. If you turn around and look at the U.S., there you would see a dividend yield of about 2%. These are the 2011 consensus estimates for both those numbers.
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Charles Rotblut, CFA is a vice president at AAII and editor of the AAII Journal. Follow him on Twitter at twitter.com/charlesrotblut.
Discussion
The dividend payout of MAPIX was $.32+ in 2008, and then went up to $.47 in 2009, but then decreased in 2910 to $.45.4, probably because of currency translations. So this type of Fund effort is still very complex for individuals trying to build a dividend growth portfolio. See "Dividend Growth Investing" for a portfolio selection process that is global, and very low risk.
posted about 1 year ago by Robert from Illinois
I am considering adding this fund to my portfolio in an IRA. Now I have a concern about the foreign taxes applied to the dividends. Is this fund better for a taxable or non taxable account? Comments would be appreciated.
posted about 1 year ago by Rick from New York
Rick - You can only get a refund on foreign taxes if the fund is held in a taxable account. If you hold foreign investments in a tax-deferred account and are charged foreign taxes, you lose the amount. - Charles Rotblut
posted about 1 year ago by Charles from Illinois
I purchased one of the dividend funds recently after much study . This will be a core long term holding.
posted about 1 year ago by Barry from Alabama
Our beloved USA is broke.... $15 trillion in Debt and climbing.....Investing outside of the USA is wise at this time and the next few decades.
posted about 1 year ago by Micheal from Georgia
As in the US: a diversified strategy for Asia investments is safer than a non-diversified one.
MatthewsAsia recommends diversifying your Asian investments the same way that you do in the US: some in growth, some in value, some in large cap, some in small...
Dividend and interest paying funds can further diversify your Asian portfolio -- but few investors think of that aspect in the same breath as Asia.
For most people, Asia = Export oriented Growth and nothing more. Jesper Madsen's dividend oriented funds offer a very nice counterbalance. I have about 10% of my total portfolio in his funds.
posted 10 months ago by George from Pennsylvania
