Hunting for dividends: is ASEAN next?

ASEAN’s dividend opportunity is underpinned by diverse and evolving market characteristics. Singapore’s domestically focused economy promises strong and stable yields across banks, alongside telecoms and infrastructure-linked companies with regional exposure. Indonesia’s dividend income is rising, led by maturing banks, telecoms stocks and resource companies that are increasingly returning cash to shareholders. Malaysia contributes income through its strengths in advanced manufacturing, government-linked enterprises and Islamic finance, while Thailand’s dividend profile is supported by energy, utilities and infrastructure operators with historically steady cash flows. The Philippines rounds out the picture with emerging dividend potential, driven by banks and utilities, as its young population and expanding consumer base gradually translate growth into shareholder payouts.

The FTSE ASEAN Index, which captures the large- and mid-cap companies listed in the five ASEAN markets—Singapore, Malaysia, Indonesia, Thailand and Philippines, has delivered a 10-year average dividend yield of 3.57%. This has exceeded the yields of major global benchmarks, including FTSE Asia Pacific ex Japan Australia and New Zealand Index (2.49%), FTSE USA Index (1.68%), FTSE Developed Europe Index (3.18%) and FTSE Emerging Index (2.90%). 

Over the past 5 years, the FTSE ASEAN Index has recorded steady growth in cash flow per share (see the chart), reinforcing ASEAN companies’ historic ability to sustain and grow their dividends. The region’s average dividend payout ratio during this period also stands out relative to global peers, underscoring a strong commitment to providing shareholders with income. Looking ahead, ASEAN’s forward 12-month dividend yield [note2] remains attractive compared with other major markets worldwide, highlighting the region’s appeal for income-oriented investors.

As at the end of 31 December 2025, more than 60% of the large- and mid-cap companies in the FTSE ASEAN Index offered dividend yields above 3%, reflecting a management culture that focuses on shareholder returns: dividends have accounted for roughly half of the FTSE ASEAN Index’s total return over time.

In an environment marked by economic uncertainty, geopolitical tensions and the prospect of declining global interest rates, investors’ appetite for reliable income streams has sharpened. Against this backdrop, the ASEAN region’s combination of attractive dividend yields, relative economic resilience and long-term structural growth stands out.

Not all dividend strategies are created equal, however. Traditional dividend approaches often focus on the highest-yielding stocks, which can lead to excessive portfolio concentration and above-average exposure to smaller companies or to businesses with weakening fundamentals.

The FTSE ASEAN ex REITs Target Dividend Index takes a different approach. It targets a 100% yield uplift relative to the broad FTSE ASEAN Index (excluding REITs). By removing REITs, the index emphasises companies with earnings-supported dividends and lower interest rate sensitivity. 

Rather than selecting the highest headline yields, the index starts by selecting companies with a consistent dividend-paying record. Using FTSE Russell’s Target Exposure methodology—a rules-based tilting framework—it gradually increases exposure to higher-yielding companies while proportionally reducing exposure to lower-yield names.

Across multiple market cycles over the past 25 years, a back-test of the FTSE ASEAN ex REITs Target Dividend index’s strategy showed notable resilience during market downturns and lower overall volatility compared with the broader ASEAN market.

While the FTSE ASEAN Index (excluding REITs) delivered an average dividend yield of 3.4% over the past decade, a back-test of the FTSE ASEAN ex REITs Target Dividend Index achieved an average dividend yield of 6.5% over the same period.

The Target Dividend strategy also offers diversification benefits. Over the past 5 years, it had a low correlation with the Russell 1000 Index (0.07) and FTSE China A Index (0.20), helping to mitigate concentration risk for portfolios heavily weighted toward US or China equities.

Many dividend indices simply rank stocks by yield and pick the companies at the top of the ranking. The problem with that approach is that very high yields are often a warning sign. They can come from smaller or distressed companies where the share price has already fallen sharply — creating what we call a “yield trap”. While the yield may appear attractive, it is often unsustainable as the share price fall is an advance indicator of a future dividend cut.

To mitigate this kind of risk, the FTSE ASEAN ex REITs Target Dividend Index combines momentum scoring with a robust dividend yield Z-score. The Z-score helps identify companies with abnormally high yields, while the momentum scoring helps screen out stocks with persistently weak price performance. By combining valuation discipline with a fundamentals-aware momentum check, the index avoids stocks that look attractive on yield alone but which are under genuine financial stress.

Dividend investing in the ASEAN region isn’t just a nostalgic nod to “old-school” value strategies—it’s a strategic response to today’s global economic realities, in which dividends have reclaimed their place alongside prospects for share price growth.

Long viewed purely as a growth story, ASEAN is quietly proving it can deliver something even more compelling: cash flows today with growth for tomorrow. With rising corporate payouts, innovative income-focused index solutions and a diverse regional economic base, the stage is set for dividend seekers to reassess this dynamic region. ASEAN is no longer just a growth story—it is a dividend story whose time has arrived.