Chart of the Week: AIA Dividend Up 8%, Announces $10 Billion Share Buyback

March 18, 2022

Stock markets investors buying Chinese stocks have not had the best experience over the past two years or so.

That’s because, while stock markets in the US were hitting all-time highs, Chinese stocks (and particularly those listed in Hong Kong) were seeing some of their biggest technology stocks get slammed by regulators.

That rout in China tech stocks has continued into 2022, although there has been a strong “relief rally” of sorts in recent days.

However, amid all this, some Hong Kong-listed stocks have continued to show that their businesses can perform. One of those companies is pan-Asian insurance giant AIA Group Ltd (SEHK: 1299).

At the end of last week, the life and health insurance firm reported its full-year 2021 results. For shareholders, there were multiple things to like about its latest earnings.

Rising dividend and monster buyback

AIA’s Value of New Business (VoNB) across its markets – a key metric for insurance firms that measures new policies purchased – saw a healthy 18% year-on-year increase to US$3.37 billion.

Meanwhile, operating profit after tax (OPAT) was up 6% year-on-year to US$6.41 billion.

Yet two things stood out the most. Firstly, AIA’s dividend per share (DPS) was up 8% year-on-year in 2021 versus 2020.

AIA has a storied history of delivering consistent dividend increases for shareholders since first listing in 2010.

Even in 2020 (amid a pandemic which shut down face-to-face business in most of the Asian markets it operates in), AIA still managed to record a 7.5% year-on-year increase in its dividend.

Second, and perhaps the more important factor, a whopping US$10 billion share buyback was announced, the company’s first ever.

The amount represented nearly 9% of AIA’s market cap at the time of the announcement. The insurance firm will repurchase the stated US$10 billion worth of shares over three years.

Beyond that, the strength of its balance sheet and capital allocation policies has highlighted how well the business has performed, across various metrics, over the long term (see below).

With demand for life and health insurance in Asia riding strong structural tailwinds, it’s further proof for long-term investors that there are gems to be found in the Hong Kong stock market – even amid its current malaise.

AIA dividend profit buyback

Source: AIA full-year 2021 earnings presentation

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares in AIA Group Ltd.

Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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