Home—Blog—Japanese stocks can deliver some impressive yields
Oct 03, 2012, 02:42
Posted byMerryn Somerset Webb
Comments (22)
I wrote a piece a few weeks ago that discussed whether those looking for income might be wise to look to Japan. I’ve just received a note from asset management company Lindsell Train that backs up the point.
Back in June they listed the holdings in their Japanese Equity Fund and analysed the changed in their dividends from as far back as they have data (an average of around 20 years). The results are pretty interesting.
The average dividend has risen 5% a year and the median by 9%. That’s not bad – if a company has been growing its dividend by 9% a year for 20 years its dividend has risen five and a half times. And it is particularly not bad given that it has happened not only in an economy considered to be entirely stagnant, but one in which there has been almost zero inflation.
Michael Lindsell, who runs the fund, has also recently looked at the largest holding in the fund – Kao, which makes up around 10% of the fund's net asset value (NAV) - and at its inflation adjusted yield since 1988. It turns out that with CPI in Japan at around 0.5% over the period, Kao’s real dividend growth has been 9.3% a year.
For comparison purposes, note that the comparable numbers for Unilever and Procter & Gamble (both considered to be solid defensive dividend payers) are 7% and 8.3%. Just one more reason not to dismiss Japanese equities as low-yielding wastes of time.
Published in Blog More articles by Merryn Somerset Webb
By John Stepek, May 24, 2013
May 23, 2013
By John Stepek, May 22, 2013
Leave a comment
(03 October 2012, 08:50PM) Complain about this comment
Some may say Roger Moore's main acting attribute springs to mind Merryn with this latest Japanese recommendation, others may point to the unofficial explanation of the Vapors global hit, to describe various fund managers of stocks from the land of the rising sun.But maybe, just maybe the girl who cried wolf, may finally have a point!
(04 October 2012, 08:12AM) Complain about this comment
Interesting article again. I agree that Japan is now a most sensible place to invest in (finally!).
(04 October 2012, 12:59PM) Complain about this comment
Oh no not again. Japan is badly run,riddled with distrust and incompetence and bust.
(04 October 2012, 01:36PM) Complain about this comment
I admire your perseverence with Japan over the years. I'm sure one day it will come good.What most worries me about Japan is their big, powerful and not too friendly neighbour. China is bound to get more shirty as this century continues. I'm reminded of what happened to Belgium at the beginning of the WWII...
(04 October 2012, 01:55PM) Complain about this comment
I suppose that on the broken clock principle (even a broken clock is right twice a day) these relentless MoneyWeek recommendations of Japan as an investment venue are likely to result in a profit for someone, somewhere, sometime. But who ? Where ? And when ? MoneyWeek has plugged Japan over and over, year after year, with dreadful results for anyone who listened. Yet on and on go the recommendations. It has been a long running obsession.Goodness, me. Even the deeply flawed Lord Keynes knew that in the long run "We're all dead".
(04 October 2012, 04:55PM) Complain about this comment
I'm sticking to my investment guns! True they've made some mistakes-the ones that we are now making- but they're not incompetent, they're not bust and their stocks appear to be cheap. Technologically they've got the lead on others in many areas too.
(04 October 2012, 07:08PM) Complain about this comment
ok so 1/what is the dividend yield on this fund?2/where can I buy it?ps if Japan is such great value how come the best dividend yield on a fund/trust seems to be about 2.25%?(2.25% is not enough for the commonman to live on)
(04 October 2012, 08:27PM) Complain about this comment
#6 Young. You are wrong. Don't be misled by this hype. Japan is not a pragmatic nation, nor an inventive one. Look at the Fukushima disaster, made massively worse by indecision and silly etiquette. Japan is the only modern democracy carrying a Public debt of 220%, almost double that of Italy and treble that of Spain. Japan is bust.
(04 October 2012, 11:14PM) Complain about this comment
Lindsell Train may have found a number of Japanese companies that are growing their dividends by 9% pa. But the Lindsell Train fund is still down 50% over 5 years.The trouble with Japan is that there is no growth. The population is aging and shrinking. Do a simple dividend discount model and the market doesn't look cheap because the growth is negative.Paying dividends out of accumulated past profits isn't sustainable. Kao should be yielding 5%+, not 2.5%.
(05 October 2012, 02:26PM) Complain about this comment
You haven't even said what the Japanese dividend IS!You compare the growth with the actual 2 UK dividend figures - what a joke.
(05 October 2012, 07:10PM) Complain about this comment
'Yoki-Monozukuri' Merryn, should be enough to satisfy the most demanding of income seekers, especially in a world where the preservation of capital is de riguer these days ;)Kao seems a good addition to a defensive portfolio, although who knows what a 31 yen dividend will be worth in the near/distant future with the combined might of Bernanke, King and Shirakawa working for the common good rather than the common man?DYOFR of course.
(06 October 2012, 05:59PM) Complain about this comment
8 - Ah, the selective, inconsistent arguments of Boris MacD again. Weren't you holding up the example of Japan keeping its interest rates - at near zero % year on year - as an example of how the UK can keep its own rates low and thus protect your precious housing market? Now it turns out that you think Japan is bust - despite its glorious export trade - and that it is essentially a basket case. What the heck does that make the UK? Oh, and the UK doesn't have any silly etiquette of its own does it?
(06 October 2012, 07:07PM) Complain about this comment
#12 Neutron.You are rather tiresome seeking to put words in my mouth rather than come up with anything worthwhile yourself.I have never held Japan up as an example of anything other than low unemployment and long life expectancy. Japan has no choice about the zero interest rate , just like us. Japanese HP's are up 200% since 1976. Japan is bust, like Spain.
(06 October 2012, 08:26PM) Complain about this comment
do you think she reads these comments?
(07 October 2012, 03:37PM) Complain about this comment
#14 mic. Of course Merryn reads the comments. She often responds to those of us who make glaring errors and she clearly listens on the rare occassions we say something useful. I look at these posts as a sort of sophisticated version of the monkey and typewriter theory of Shakespeare. If we all throw enough **** at the wall some will surely stick.
(08 October 2012, 11:14AM) Complain about this comment
No doubt, the Japanese stock market is cheap and I have a large holding via my pension. Thing is, the discounts on Japanese ITs have not yet reached crisis levels and Japan has yet to deal with it's debt problem.I know it will never truly deal with that one, except via inflation. Maybe the time to invest will be when the fiscal crisis hits, or Japan is forced to inflate because of a conflict with China?
(08 October 2012, 01:02PM) Complain about this comment
I have some Japanese investments, but not much and only added recently as a bit of diversity and a flutter. I too share many of the reservation about the Japanese economy and their ability to improve it. Having worked for a massive Japanese company for 10 years and visited the country many times I can tell you that their companies are poorly run, risk adverse and creatively backward. They are only successful because the people work so hard and are (sadly) wholly dedicated to their masters. And 'no' I don't have any axe to grind because when they shut us down they gave me a VERY generous redundancy package. As Precious would say, "Praise the Lord for the truly useless Japanese multi-national.."
(08 October 2012, 01:35PM) Complain about this comment
@ 15. BorisThanks for the laugh!
(08 October 2012, 06:09PM) Complain about this comment
I seem to remember recently a japanese company who hired a foreign ceo to help sort out there company. He did but there was a lot of animosty generated because he didn't do it the 'japanese way'.Unfortunately I cannot remember the name of the company, Panasonic or Sony? Maybe. Anyway the point I'm trying to put over is the human element. Numbers are all very well but its what happens in the boardroom and on the shop floor that will really make the numbers, hopefully without creative accounting like Olympus had!
(11 October 2012, 10:26AM) Complain about this comment
Nobody ever answers the question - what will make Japan 'not cheap', if its cheap now (and some may suggest otherwise) what is to say it won't still be cheap 20 years time when you retire? What is the driving force thats going to push up valuations that hasn't been there for 20 years.
(11 October 2012, 11:46AM) Complain about this comment
Reply to Jim W's comment above - I believe the Japanese company which appointed a European CEO was Olympus. After three months said CEO identified major accounting problems and irregularities, so the Company's Board responded by sacking him.A case was brought against the company as a result of which the whole board had to resign. Not sure if said CEO ( British I think ) got his job back.Not an invesment climate I am keen to be involved in. However, Howard Stringer, a British award winning television producer, was until recently the very succesful CEO of Sony and retired with honour a few months back.
(17 October 2012, 03:41PM) Complain about this comment
I might have agreed with this a couple of years back, but something has happened that has changed all this: Fukushima. The area around the power stations affected will be uninhabitable. The numbers of deaths from cancer will skyrocket. In addition, the population is imbalanced with a massive preponderence of elderly people. The average age of a Japanese farmer would be collecting a pension in the UK. Far from being a good investment, I would say that Japan as a country is finished.
Name This will be the name displayed with your comment.
Email This helps us verify comments are genuine. It will not be displayed anywhere on the site and is stored confidentially.
Comment Please keep your comment within 1,000 characters and relevant to the main topic. We encourage healthy debate, but we don't allow insults or bad language. Anything off topic or unpleasant, we'll remove. Enjoy the conversation! Thank you.
To prevent spam-related comments please enter the characters shown in the 'Captcha' box to the left.
Enter the text from the box above
Remember my details
By leaving a comment you accept our terms and conditions.
Our free daily email, Money Morning, is an informative and enjoyable analysis of what's going on in the markets. Written by our Editor, John Stepek, and guest contributors.Sign up FREE to Money Morning here.
24 May 13
23 May 13
16 April BBC Radio Scotland(From 1h 45m in)
21 March Radio 4: Moneybox Live
12 March Photogallery of Merryn's talk at BAB London
Become a smarter investor in just 3 minutes a day.
MoneyWeek is not responsible for the content of external internet sites.