A total-return dividend portfolio focusing on both dividend yields and dividend growth could include names ranging from small and mid caps that may be yielding 2 per cent, but potentially growing their dividends at a 15 per cent rate, to solid businesses that could deliver a stable and recurring dividend yield of 4-5 per cent.
This balanced approach seeks to create a portfolio that can benefit from an attractive dividend yield without giving up on growth.
In addition, it is important to focus on the sustainability of the dividend stream. Many Asian equity income portfolios are built with a lot of emphasis on yield, containing high-yielding stocks that can have challenging underlying businesses.
But while investors can analyse companies, they cannot predict the future. Given the level of uncertainty, a strategy of total return can help income investors weather any upcoming storm. As the contribution of income strategies in Asia has been meaningful over the long term, it can offer a less volatile means to access the faster-growing economies in the region, while at the same time mitigating risk and providing downside protection.
Robert Horrocks is chief investment officer at Matthews Asia
