Morgan Stanley reveals its top Asia dividend stocks

Published Thu, Oct 7 20217:30 PM EDTUpdated Thu, Oct 7 20218:22 PM EDT

Zavier Ong

Morgan Stanley has revealed its top dividend-paying stocks for investors looking to remain defensive in what could be a volatile fourth quarter. Its picks include some of Asia Pacific's biggest names in real estate, financials, industrials and energy. Investors on the hunt for yield given recent market turbulence may well be looking for some low-volatility stocks with hefty and stable dividends. In a note from Oct. 5, Morgan Stanley ran what it called an "Enhanced Dividend Screen" to identify MSCI Asia Pacific ex Japan index constituents with a market capitalization of more than $2 billion and minimum dividend yield of 2.5%. The bank's analysts, led by Gilbert Wong, said they expect the resulting stocks to outperform over the year ahead, and also be the least likely to announce dividend cuts. All are rated overweight by the bank. Stock picks Hong Kong-listed PetroChina , a subsidiary of China National Petroleum, is expected to deliver a hefty dividend yield of 6.5% for full-year 2021, according to Morgan Stanley. The bank views the Chinese oil and gas producer as a proxy for rising oil prices due to its significant exposure to marginal oilfields. It is also well positioned to benefit from China's push for carbon neutrality due to its vast natural gas resources, the analysts said. They added that China's transition from regulated domestic gas pricing to a market-based pricing structure should also benefit the company's gas segment. Real estate giant Sun Hung Kai Properties is another stock favored by Morgan Stanley. The Wall Street firm expects the company's dividend yield to remain unchanged at 5.1% for the full year, noting the company's consistent growth in recurring income and dividend per share payouts. It believes the company could enjoy further rental income upside from an increased land bank in Hong Kong and an uptick in leasing space in China. Hong Kong-listed real estate developer Longfor Group also made the bank's list, with an expected dividend yield of 5.5% for the full year. The developer should post "solid sales growth of 15% year-on-year in 2021 and 15-20% in 2022-2023," the bank said, as well as "double-digit earnings growth" in the corresponding period. The company also enjoys a strong balance sheet and low funding costs, according to the analysts — both key considerations amid the current regulatory tightening in the country. China has embarked on a steady stream of regulatory clampdowns in recent months, with the introduction of a slew of new rules impacting diverse sectors. China's property sector has also come under intense scrutiny with indebted China Evergrande in the spotlight , stoking fears that authorities will further tighten access to credit. South Korea-listed Hana Financial and KB Financial also made Morgan Stanley's top 10 dividend-paying stocks, with projected dividend yields of 6% and 5.3% respectively. South32 , a mining and metals company listed on the Australia Stock Exchange, has the biggest projected jump in dividend yield on the bank's list. Morgan Stanley said it's expected to come in at 5.2% for the full year, compared to 2.2% in full year 2020. A-shares A number of A-shares (domestically traded shares of mainland China-based companies) also made the list . These include construction behemoth China State Construction Engineering and the state-owned Industrial and Commercial Bank of China . They are expected to deliver dividend yields of 5.1% and 6% for the full year, respectively.

Hong Kong skyline seen at dusk.

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