Dividends can be a sign of quality companies in developing countries
- Political and financial systems in many developing countries have come of age during the past two decades. Emerging markets generally fared better than traditional developed markets during the recent economic downturn.
- Companies that serve these rapidly expanding economies can be potentially attractive investments, and in some cases the companies have adopted a policy of rewarding investors by paying dividends. In emerging markets, many companies that pay the highest dividends have also been among those with the highest returns.
- The chart shows that companies with dividend yields that ranked in the top 20% of the index provided superior average annual returns of over various periods ending ended September 30, 2011.
- Investing globally entails some additional risks, and yet many developing countries now have more competent fiscal and monetary policies than in the past. Improved legal, regulatory, and economic climates within many developing countries have brought increased stability and transparency.
“The emerging markets have relatively unlevered balance sheets, access to capital like they’ve never had before, access to technology and a rapidly growing middle class. That’s where the growth potential is going to be.”
— Gordon Crawford, portfolio counselor Capital Research and Management Company Capital Research and Management Company
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