Morgan Stanley names 10 Asian stocks set to reward shareholders with bigger payouts

Published Tue, Jan 11 20226:40 PM EST

Morgan Stanley has named a raft of Asian stocks it says will deliver "secure" dividend growth over the next few months. Here are 10 of its top conviction dividend stocks, all rated overweight by the bank. China stocks Morgan Stanley expects China State Construction Engineering to deliver 10% earnings growth into 2022, supported by steady revenue growth and its contract backlog, the bank's strategists, led by Gilbert Wong, said on Jan. 4. An "easy credit" environment should also help the company grow its business and gain market share, Wong added. The bank has forecast the company to deliver a dividend yield of 4.8% in 2022, up from 4.1% last year. Meanwhile, Morgan Stanley believes Industrial Bank Co. is a long-term beneficiary of the transition in China's financial markets. The stock's current valuation is also "attractive," Wong added. The Chinese bank delivered a dividend yield of 4.1% in 2021, which Morgan Stanley expects to rise to 5% this year. Morgan Stanley also likes China National Building Material — China's largest cement company — which the bank said is expected to improve its earnings "materially," while reducing its net gearing — a measure of its debt — this year. The bank added that the company is expected to benefit from more major infrastructure investments in northern China, as well as looser restrictions on property purchases. Morgan Stanley has forecast the company to deliver a dividend yield of 7.7% this year, up from 5.8% in 2021. Another Chinese stock on Morgan Stanley's list is Chinese gas distributor Kunlun Energy — a subsidiary of energy titan PetroChina — which the bank expects to have strong growth momentum. The bank said the company's earnings growth will be driven by higher energy prices, potential acquisitions, stronger end-market demand for gas and growth in the company's gas transmission business. Morgan Stanley has forecast a dividend yield of 3.2% for the stock this year. The company delivered a dividend yield of 27.5% in 2021 — largely on the back of a special dividend paid out to shareholders following the completion of the divestment of its midstream assets. Morgan Stanley also likes Shanghai Pharmaceutical for its "fully integrated" platform, and said the company should benefit from a rise in government healthcare spending, higher demand for its high-value patented drugs and vaccines as well as an improving drugs pipeline. The company is expected to deliver a dividend yield of 4.8% this year, an increase from 3.9% in 2021, according to Morgan Stanley. Australian stocks The bank expects Australian property group Dexus to benefit from an improving office sector in Sydney, which makes up 70% of the company's revenue. It is expected to deliver a dividend yield of 4.8% this year, largely unchanged from 2021, according to Morgan Stanley. The analysts also like diversified real estate developer Stockland for its "undemanding" valuation, resilient retail portfolio and strong medium-term development potential, Wong said. The bank expects the company to deliver a dividend yield of 6.3% this year, an increase from 5.7% in 2021. South Korean stocks Morgan Stanley said South Korean steelmaker Posco is on track to achieve a 511% increase in operating profit for 2021 on the back of a strong recovery in the sector. Meanwhile, the company's non-steel businesses have also stabilized and are benefiting from secular growth, the bank added. It expects the company to deliver a dividend yield of 5.9% this year — double its 3% dividend yield in 2021. Meanwhile, an earnings recovery at the banking operations of KB Financial is on the cards, while its non-bank and brokerage operations should also see improvements, Morgan Stanley said. The firm is expected to benefit from a rising focus on digitalization, Wong said. KB Financial is expected to deliver a dividend yield of 5.5% this year, up from 3.4% in 2021, according to the bank. Indian stock Morgan Stanley said earnings at Gail (India) — the country's largest natural gas company — will continue to grow over the next three to five years, while the gas transmission segment will benefit from higher volumes and tariff revisions. The company's upcoming pipelines in eastern and northern India will also support long-term volume growth, the bank added. Morgan Stanley expects the company to deliver a dividend yield of 6% this year, up from 3.7% from 2021.

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