Asia’s rich are proving remarkably resistant to the slowdown in global economic growth, as evidenced by another bumper year for dividends during 2011, as measured by our annual survey of Asia’s richest families. (See the full list here.)
Once again, the total dividend payout for the 100 families on our Rich List exceeded $10 billion, with Li Ka-shing and his family paying themselves more than $1 billion after another solid year from their three biggest holdings: Hutchison Whampoa, Husky Energy and Cheung Kong. And the Li family remains a good bet for next year as the income from their latest acquisition, Northumbria Water in the UK, starts to contribute to the pot.
Overall, dividends for the top 100 families were down by almost 5% on last year’s total of $10.5 billion. The data we use is taken from annual reports published last year, so for some companies that may represent the relatively buoyant conditions in 2010, while for others that publish later in the year there may be more influence from the relatively weaker conditions during the first half of 2011. We expect further deterioration once this year’s shareholding patterns are analysed.
However, the Li family suffered no such bad fortune during 2011. Dividends from their shareholdings bucked the overall trend to rise to $1.3 billion, up 6.6% from the previous year and a significant recovery from the $650 million the family earned during 2009.
Li’s continued success is remarkable, to be sure, but his principal method of wealth creation has been through canny acquisitions rather than entrepreneurial dynamism. Despite his Superman reputation, Li, who started his career making plastic flowers, has ploughed his cash into defensive industries that offer reliable income — property, ports, energy and utilities — and the British water investment represents further expansion into a low-growth, developed market.
This is hardly surprising. Growth companies tend to pay low dividends, which makes it hard for real entrepreneurs to do well on our list. Looking at the companies owned by the top earners, very few are innovative businesses creating valuable new products and services.
Samsung is probably one of the best examples of a world-leading brand, but its court battle with Apple has drawn attention to the stark differences between the two companies. Apple’s great innovation has been to build a company run by world-class designers, whereas Samsung has been found guilty of simply copying the design innovations of its American rival.
Even with its troubles, Samsung is still more innovative than most of the companies that figure prominently on our list. Overall, property is comfortably the biggest earner, responsible for 22% of the dividends counted in our survey.
Sun Hung Kai Properties, Evergrande Real Estate and Country Garden paid out the most to the families on our list.
The second-placed Wang family generates the bulk of its income through plastics and chemicals, while India’s Tatas have diverse interests, from their traditional holdings in utilities and basic materials, through to hotels and outsourcing.
Other industries that are well represented on our list include agriculture, food, banks and insurers. However, the lack of more dynamic and innovative businesses is as much a function of economic development as anything else.
As Asian consumers get richer, they will become more discerning in the things they choose to buy with their money. This is already starting to change.
Companies that make discretionary consumer goods comprise the second-biggest sector in our list, representing 14% of the dividends paid out to Asia’s richest families, up from 11.3% in last year’s list.
Hong Kong remained the biggest source of wealth in the region, with a 31% share, though that is slightly down on last year. India’s wealthy families again did well in second place, up almost 8% from last year, while Malaysia’s share of dividends dropped 30%, thanks largely to a fall in earnings across the Kerry group, controlled by the Kuoks.
At the bottom of the table, the Philippines swapped places with Indonesia after a 60% gain in dividends. The improvement was across the board, with big jumps up the table for the Sy family of SM Investment, the Aboitiz group and the Ayalas.
Chinese property tycoon Hui Ka-yan, who founded Evergrande Real Estate in 1996, tops the list of new entrants this year. The company launched an IPO in 2008 and, after a paltry dividend in its first full year, the company paid out enough in 2011 to catapult Hui straight into our top 10 with $199 million from his stake in the company. He has no other significant holdings.
As with many Asian property tycoons, Hui is a controversial character. A short-seller claimed in June this year that he had used “accounting tricks and bribes” to hide the fact that Evergrande is insolvent. It also pointed out that he has directed $2.5 billion of the company’s money into unprofitable ventures such as Guangzhou Evergrande, a lavishly funded professional football team, and Evergrande Real Madrid Football Academy, a project to build the world’s biggest football training school.
If there is any truth to the allegations, Hui could be a short-lived member of our top 10.
Otherwise, most of the new entrants came in at the lower end of the list. Lee Yin Yee, chairman of Xinyi Glass, entered at 55 thanks to a $46 million dividend payout to himself and other family members. Bon-Joon Koo and his relatives, who control Korea’s LG group, re-entered the list at 59 with a $40 million dividend from LG Corp and LG International.
The families behind Chinatrust in Taiwan, Olam in Singapore, MMC in India and Hankook Tire in Korea all came in at the lower end of the list after missing out last year.
About the list
Compiling the list is a painstaking task. The disclosure of directors’ interests varies across the region, as does the level of English-language disclosure, which makes it tricky to accurately capture the true beneficial shareholdings of some individuals and families.
Our data also only captures listed companies, obviously. Most of the region’s tycoons have substantial public shareholdings, but some preside over entirely private business empires, while others own their shares through a complex network of cross holdings, comprising both public and private vehicles.
The Lee family that controls Samsung, for example, probably earns substantially more than the $143 million credited in our list, but the group is made up of around 20 listed companies and 60 private companies, many of which own shares in each other. Indeed, the ownership structure of Samsung allows the family to control the entire group with a relatively low level of equity. Its main holdings are in Samsung Electronics and Samsung Life, which is the group’s de facto holding company, though a private entity called Samsung Everland also has substantial group holdings.
We inevitably suffer from some errors of omission. The research we conduct is not exhaustive, due to the limits of time and deadlines, and there may be some families or individual holdings that we have failed to include. However, we have tried to be as comprehensive as possible and believe that the data provides a good overview of how Asia’s tycoons are paying themselves.
This article first appeared in the September issue of FinanceAsia magazine