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Efficiency of Nations

Which markets most efficiently convert assets and earnings into dividends?

Dividend Payout Ratio: The ratio of dividends paid relative to net earnings. Simply, it's Price/Earnings x Dividends/Price (i.e. P/E x Yield).

Book Value (per share): net assets of the company divided by outstanding shares. Used to calculate the Price to Book (P/B) ratio.

I introduce a third ratio:

Dividend to Book: The ratio of dividends to book value per share. i.e. P/B x Yield.

Charting the indexes for select countries and regions (corresponding to Blackrock ETFs):

Notes:
  • Hidden in the middle are Europe 350 and MSCI Taiwan.
  • Higher Dividend Payout is better, but you don't want earnings decreasing, or not being reinvested.
  • Higher Dividend to Book is arguably better, but you don't want assets devaluing, or management selling the silverware just to maintain dividends.
  • I would prefer lower Dividend to Book because it means higher dividends are being taken from earnings, not asset drawdowns.
  • Do not draw conclusions about culture. The sector makeup of each index is quite different. Australia's ASX 200 and Singapore's STI are overweight financials. Some industries naturally pay out more than others.

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Location: Koganei, Tokyo, Japan

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