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Midas share tips Henderson Far East income fund Asian dividends

Most people think of Asian companies as either high risk, high growth or both. Rarely do investors associate them with big dividends. But times are changing, as more and more Asian businesses realise how important it is to reward shareholders.

Individual investors in the UK would find it hard to source these companies themselves, but the Henderson Far East Income fund does it for them.

Listed in London, the investment trust offers investors access to a wide range of Asian firms that not only pay dividends but are also growing fast. The are 353p, the fund pays dividends quarterly and the stock should deliver handsome rewards over the next few years.

Experienced: Mike Kerley has doubled payouts to shareholders

In the past, Asian companies focused almost exclusively on growth, investing all the money they made on expansion and development. Many are now maturing, setting aside cash for investors even as they continue to grow.

Henderson looks for firms that are already paying dividends and are expected to increase payments substantially over the next five years. 

History shows that there is a strong link between progressive dividends and rising share prices, so if Henderson makes the right choices, investors in this fund will be doubly rewarded. Their quarterly dividends will rise and the fund’s value will go up, too. 

This is exactly what has happened over the past few years. The value of the companies in the fund has increased by 44 per cent since 2010 and dividend payments have increased by almost 30 per cent. Over the next three to five years, however, the fund is expected to do even better.

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Some economists worry that China and other countries in Asia are suffering – and will continue to suffer – from the prolonged economic downturn in the West. However, Asia is becoming increasingly self-sufficient and a number of its most successful firms are growing not by selling products to the West but to local consumers.

Many of these businesses are in Henderson’s portfolio. The fund does invest in some export-oriented companies, such as computer groups Acer and Asus and smartphone maker HTC. But most of its holdings have a strong regional focus, such as Charoen Pokphand Food, a Thai business that sells animal feed, rears pigs and chickens and sells food products.

The fund is run by Mike Kerley, who has been involved in Asia for more than 15 years. He started managing the business in 2007, since when dividend payments to shareholders have soared. Over the next few years, he is determined to do even better.

The fund has holdings in 50 Asian-Pacific companies and an individual holding is rarely more than three per cent of the portfolio.

A number of the businesses are based in China but the fund includes firms from across the region, including Australia, Singapore, India, the Philippines and Indonesia.

The most recent payout was 4.1p on February 28. Dividends are paid in four equal instalments, starting each August, so this year’s total will be 16.4p. Dividends are also paid gross as the fund is headquartered in Jersey.

Midas verdict: Henderson Far East Income’s share price is directly related to the value of the companies in its portfolio. As they increase in value, the fund follows suit. At 353p, the shares have considerable potential – and they offer a 4.6 per cent yield.

For investors looking for something a little unusual with the solidity of a regular dividend, this fund is just the ticket. Buy.

Traded on: Main market Ticker: HFEL Contact: 0800 856 5656 or hendersonfareastincome.com

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