The Big Asian Payback; Returning profits to shareholders is now seen as a sign of success in the once-growth-obsessed region.

Byline: Alexandra A. Seno

Every once in a while, it makes sense to rediscover the wheel. Outside of Japan, the hot new offering from Asian companies has been a staple in U.S. and European markets for decades--it's the cash dividend on stocks. The trend reflects a dramatic shift in Asian corporate cultures since the crisis of 1997-98, when a model built on borrowing massively to finance growth, without regard to profit, crashed and burned. Before the crisis, paying out part of profits as dividends was not only rare, it "was almost seen as a sign of failure," says Robin Parbrook, head of Pacific Equities (excluding Japan) for Schroders, the international fund-management firm. "The conventional wisdom was that in fast-growing Asia, companies should invest. We have had a sea change."

Today healthy dividends are perceived as a sign of success and good corporate governance. As Asian companies look more and more to stock sales rather than bank loans as a legitimate way to raise money, they are increasingly focused on generating profit, not merely growing revenue at any cost, and are showing respect for shareholder interests. Now companies generating cash no longer feel compelled to find ways to spend it on further expansion, if the opportunity is not there. "Investors think: 'Pay us cash and don't waste money making unfeasible investments'," says Parbrook.

The trend reflects a new corporate conservatism that spans East and West, where dividends are also very much back in style. Asian corporations have used the years since 1997--and Western corporations since 2001--to rebuild corporate balance sheets, reduce or eliminate debt and install better management systems. But strikingly, the willingness to reward shareholders is now arguably even stronger in Asia than in America. This year, companies in Asia will give out an unprecedented $70 billion in dividends, according to research by CLSA Asia-Pacific Markets, a brokerage specializing in the region. The figure represents double the amount in 2002 and almost six times that in 1998, the year of the Asian financial crisis. Today dividend payouts (the percentage of earnings allocated as dividends) are almost double in Asia what they are in the United States, according Thomson Financial, the economic-data information provider.

Every major market in Asia now has a ...