The percentage of companies paying dividends has increased at a faster rate within emerging markets than in developed markets over the past 16 years, a new report has found.
According to the report entitled A Field Guide to Emerging Market Dividends, dividend payers have significantly outperformed non-payers.
S&P Dow Jones Indices senior director of global research and design, Aye Soe, said emerging markets play a “vital role” in expanding the global economy.
“The composition of global business leaders is changing as well, reflecting the growing clout of emerging economies,” Ms Soe said.
“As emerging economies mature, the investment landscape, opportunity sets, and the types of strategies available to investors are changing as well.
“A rising percentage of companies paying dividends as well as higher payout ratios than developed markets – have made enhanced yield strategies possible for income-seeking global investors.
“Among the dividend payers, those yielding the highest have also tended to have the highest risk-adjusted returns,” she said.
Ms Soe said that the outperformance delivered by dividend-payers is consistent across regions and sectors.
“Together with higher yield, these risk/return properties of emerging market dividend payers may be worthy of consideration by investors who are seeking to access the economic growth potential of emerging markets,” Ms Soe said.
According to the report, emerging markets will account for more than half of the world’s GDP by 2019 on the basis of purchasing power.
By 2025, 46 per cent of all Fortune Global 500 companies are expected to be domiciled in emerging economies, the report said.