Investors should be looking to focus more on emerging market dividend yields in order to increase returns for their portfolios, as companies in these areas have less debt and growing cash flows compared to their counterparts in the developed world according to ING Investment Management.

The investment manager stated that the dividend yield on emerging market equities is currently 3 per cent, higher than the 2 per cent dividend yield recorded in the US and the 2.6 per cent figure in Japan. ING IM senior investment manager Manu Vandenbulck commented that “emerging market companies will pay 35 per cent of related earnings as dividends, which is a third higher than in 2000”.

Around 85 per cent of emerging market companies are currently paying dividends compared to the 82 per cent figure in the developed world. More than 600 stocks in emerging markets globally offer a dividend yield of over 2 per cent and have been classed as sufficiently liquid for institutional investors.

Vandenbulck added: “It is no secret that emerging market equities have been seen as attractive because of their strong capital growth potential, but increasingly the story for investing in this asset class has expanded to include dividend yield. Many of these emerging markets have ‘emerged’ and they offer some of the best investment opportunities of anywhere in the world from both a capital growth and now a dividend yield perspective.”

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