abrdn Asian Income Fund (AAIF) has announced its annual results for the year end 31 December 2024. The company delivered a share price total return of 12.0% and a NAV total return of 10.8%, slightly behind the benchmark which returned 12.6%. The company also saw a 22.8% increase in the dividend for the year, providing a yield of 6.6%, and a significant reduction in the ongoing charges ratio following a renegotiation of the management fee at the beginning of the year.

The discount at the year end was 12.5%, although at the time of writing it has reduced to around 10.5% following the introduction of the new enhanced dividend policy.

The board has consistently prioritised delivering meaningful dividends to shareholders alongside capital growth in the Asian region, and recognises investors’ continued appetite for yield in the current interest rate environment. Accordingly, since the year-end, the company has announced that the dividend will in the future be set at 1.5625% per quarter of the NAV, equating to approximately 6.25% of NAV per annum. The dividend will be calculated using the company’s NAV on the last business day of the preceding financial quarter (i.e. the end of March, June, September, and December).

Based on the company’s NAV as at 31 December 2024 and closing year-end share price, this enhanced dividend policy would equate to a notional annual dividend yield of 7.1% based on share price. This approach ensures a consistent and attractive income stream for shareholders while broadening the appeal of the company’s shares and, over time, aiming to narrow the discount.

The first dividend payment to be made under the enhanced policy will be in May 2025, for the quarter ended 31 March 2025.

Discussing the performance, the manager noted;

“Throughout 2024, geopolitical events, including tariff risk from Donald Trump’s return as US president, and US interest rate changes, induced volatility, but our focus on quality stocks in Asia provided stability and we took advantage of growth opportunities during better market phases.

“The US Federal Reserve reduced interest rates three times during the year. Some Asian central banks followed suit, creating an environment conducive to investing in high-yielding equities. Singapore, which is one of the largest markets in the portfolio, was among the best performers, driven by solid earnings from local banks.

“Asia was among the beneficiaries of buoyed investor optimism around artificial intelligence and related applications, given that the region lies at the heart of various technology supply chains. The Taiwanese market, which has a heavy technology tilt and is the largest country weighting in the portfolio, was the top performer in the region.

“China and India both posted gains that beat the regional index. China’s performance was thanks to monetary and fiscal stimulus measures, which signalled a clear shift towards growth and resulted in a late-year rally. The key event in India was Prime Minister Narendra Modi’s election victory earlier in the year, but the market lost some momentum towards the year-end due to concerns over slowing domestic growth and as China’s stimulus measures led to a rotation out of India.

“Elsewhere in the region, there was political turmoil in South Korea with the short-lived imposition of martial law, which led to significant market underperformance, making it the worst-performing country in the region over the year.”

Regarding the outlook, the manager continued;

“We are cautiously optimistic about the outlook for Asia. While macroeconomic and geopolitical uncertainties persist, the region’s prospects are underpinned by solid economic fundamentals and structural growth trends. Asia’s GDP growth is forecast to remain above 5% on average, making it the largest contributor to global GDP for many more years to come. Asia also boasts a demographic dividend. Many countries are seeing increases in their working-age populations, leading to higher productivity and economic growth. This ensures sustained demand for products and services from quality companies.

“The focus on dividends in the region is also growing. Policy is another tailwind. Governments across the region are increasingly focusing on shareholder returns and implementing policies that support dividend growth, such as the Value Up programme in South Korea. This is coupled with a strong emphasis on improving corporate governance, which ensures that companies are managed more effectively and transparently.

“All the above factors contribute to a more stable and attractive investment environment, making dividend stocks a compelling choice for investors seeking reliable income and long-term growth opportunities.

“Importantly, as income investors in Asia, we don’t have to sacrifice growth. High-quality growth companies such as TSMC, Tencent, and Power Grid are all paying growing dividends to their shareholders, with the portfolio’s highest sector weighting in technology. As mentioned earlier, we are also finding dividend opportunities in growing sectors such as green energy (Power Grid), AI (Sunonwealth and Accton Technology), and consumer products, including retail banking (DBS).

“Finally, we believe that our strategy of investing in high-quality, dividend-paying companies is likely to continue generating positive results, even in a volatile market environment. The portfolio is positioned well to capitalise on the income and growth opportunities in Asia, with its diversified portfolio and long-term investment approach providing resilience against market volatility and helping capture growth during strong market phases.”

AIFF : abrdn Asian Income Fund wraps up solid year, optimistic about future