In recent times, the dominance of a select few American technology stocks has overshadowed almost every other market. This is particularly evident in anything related to Asia, where fears about China’s economy and tensions over its stance towards Taiwan have deterred investors. However, what often goes unnoticed is the attractive income generated by companies in the region, despite Asia’s historical association with faster economic growth than the West.
The MSCI All Countries Pacific ex Japan index, which includes Australia, consists of nearly 60% of companies yielding more than 3%. This level of yield is comparable to high-yielding markets such as Europe and the UK. Richard Sennitt, manager of the Schroder Oriental Income investment trust, recognizes this potential for rich returns. Taking over as its lead manager in 2020 after Matthew Dobbs’ retirement, Sennitt has built on the trust’s prudent approach.
Sennitt’s strategy focuses on high-quality companies capable of delivering increasing dividends, a task made easier by Schroders’ extensive resources within the region. The success of this approach is evident in the trust’s performance under Sennitt’s tenure, as well as its track record since its inception in 2005. Dividends have steadily risen at an average annual growth rate of just over 4% in the past five years, with a dividend cover of 1.25 times providing confidence in the potential for continued growth.
While growth-oriented investors may be deterred by the trust’s emphasis on income, its long-term total returns serve as a reminder that reinvesting income, if not immediately needed, can be a highly successful investment strategy.
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