12 Jan How the Asian Consumer Will Fuel Dividend Growth for the Next Decade
This article was first posted on 12 January 2022 and updated on 11 April 2022.
In the past, Christmas shopping would make or break a retailer’s year.
The end of the year shopping period traditionally kicks off with Black Friday.
This momentous day gets its name from a well-worn narrative that retailers will spend the entire year operating at a loss (“in the red”) only to turn-around into profits (“went into black”) on the day after Thanksgiving.
But retailers have more options these days — that is, if they expand their horizons to Asia.
Retail sales on Singles’ Day, a celebration which originated in China, has eclipsed the collective sales generated from Black Friday and the Thanksgiving weekend that follows.
And it’s not even close.
Between 2016 and 2020, AliBaba’s (SEHK: 9988) (NYSE: BABA) gross merchandise volume (GMV) for Single’s Day more than quadrupled from less than US$18 billion to over US$74 billion.
In 2021, a year when the Chinese government cracked down on the tech giant, sales from the period rose past US$84.5 billion.
The Asian consumer takes over the driver’s seat
The centre of gravity for retail sales has shifted to Asia.
Research firm McKinsey calls Asia the world’s consumption growth engine — and it’s not hard to see why.
Income levels in the region are rising …
… and with it, Asian retail sales have experienced broad-based growth, ranging from basic daily necessities to luxury goods.
The impact to dividend growth for investors has been staggering.
Asian consumption drives higher dividends
Apple (NASDAQ: AAPL), the world’s largest company by market capitalisation, drew in more than a third of its revenue for fiscal year 2021, totalling over US$123 billion, from Asia.
For context, that’s more than double the US$50 billion that the Cupertino company generated from the region in fiscal 2013.
There is little doubt that Asia has been an important contributor to the firm’s top line growth …
… and with it, rewarding investors with higher dividends.
Between fiscal 2013 and 2021, dividends from the iPhone maker rose from US$0.42 to US$0.865.
Apple is not the only beneficiary.
Nestle (Malaysia) Berhad (KLSE: 4707), a familiar household name listed across the causeway, has a long history of paying out satisfying dividends.
In 1996, the snack manufacturer paid out RM 0.72.
In 2020, its dividend payout more than tripled to RM 2.42, no doubt benefiting from higher revenue and profits as Malaysians spend more on its products.
Higher income will also help Asians access better healthcare.
Demand for Abbott Lab’s (NYSE: ABT) FreeStyle Libre device, a continuous glucose monitoring system, has seen device revenue increase by close to 37% year on year, bringing in US$3.7 billion for 2021.
The healthcare firm has more than tripled its dividend payout from US$0.56 in 2013 to US$1.80 in 2021.
Abbott Labs derives 13.1% of 2021 sales from three Asian countries alone, namely China, Japan and India.
The three examples above are just a sample of the dividend growth that is possible when you pick the right companies to back and how these select few stocks can benefit you.
Get Smart: The rising Asian tide lifts dividends
By 2030, Statista and the World Economic Forum estimates that the Asian Middle class could rise to 3.5 billion, from two billion in 2020.
The addition of another 1.5 billion new members to the higher earnings class is expected to drive higher demand for services and consumer goods …
… creating many opportunities for companies to tap on this growth.
Finding the right business to tap on this growth trend is key.
That is why David Kuo, my co-founder, has committed S$100,000 of his own money to the Asian Consumer Portfolio.
It’s still early days for the portfolio.
Like most things in life and investing, there will be ups and downs in the years ahead.
But if you know David, you know that he will be relentlessly focused on adding to dividend-paying companies in a bid to increase his dividend inflow for the future.
By buying stocks that are consistent dividend payers, the portfolio will continue to receive regular income, regardless of the ups and downs in the stock market.
This cash can be re-deployed into the same dividend payers to generate even more income in the future.
Do that every year after year, and you will start to experience the magic of compounding.
There are few better things in investing than that.
This is your chance to tap into David Kuo’s decades-long experience in one sitting! We have released a Special Free Report that outlines his strategies for 2022 and beyond. If you’re looking into dividend stocks next year, then this FREE report will be invaluable to your success. Click here to download now.
Disclosure: Chin Hui Leong owns shares of Apple.