Push for Better Corporate Governance Pays Dividends in Japan | Capital Group

  • ACCOUNTS
  • INVESTMENTS
  • CLIENT SOLUTIONS
  • INSIGHTS
  • EVENTS
  • ABOUT US

Quarterly Outlook

sustainable income  |  dividends  |  october 2015
Push for Better Corporate Governance Pays Dividends in Japan

Japanese Companies Are Returning More Cash to Their Shareholders

“It is no longer about being invested in Japan or being out of Japan. You actually have a true distinction between companies that are behaving in a much more shareholder–friendly point of view and companies that are still engrossed in their old-fashioned way of managing the business.”

Gerald Du Manoir
Gerald Du Manoir Portfolio Manager Los Angeles office 27 years of experience (as of 12/31/16)

Dividends and Share Buybacks Are on the Rise in Japan ...

Share buybacks are based on common stocks, excluding purchases from Resolution and Collection Corp. and repurchase of preferred shares. FY2015 and FY2016 are forecasts by Nomura Securities. Figures for dividend growth are the compound annual growth rate.

Sources: Above chart, Nomura Securities, based on companies’ disclosures and Toyo Keizai’s materials. Below chart, FactSet.

... and There May Be Room for Growth

Dividend Growth (%)

1 year

3 year

Yield (%)

Nikkei 225

22.0

13.5

1.39

S&P 500

11.2

14.0

1.94

MSCI Europe

(13.6)

(3.4)

3.32

MSCI EM

(4.4)

(4.6)

2.60


As of 6/30/15.



There are indications that Japanese companies are placing a greater emphasis on investor returns and breaking with a tradition of hoarding cash.

Returns on equity for Japanese businesses historically have lagged companies in other developed markets. In an effort to change that, Prime Minister Shinzo Abe’s administration is pushing for improvements in corporate governance as part of its economic recovery plan. A new corporate governance code encourages companies to focus on profitability, capital efficiency and the appointment of outside directors.

Japanese companies appear to have received the message loud and clear. Some have begun to implement new policies aimed at improving returns on equity. What’s more, dividend payments and share buybacks have been rising in recent years, a trend that the market expects to gain momentum in the coming quarters.

As you can see in the chart above, dividend growth among Japanese companies has outpaced growth in other markets.

 

Select companies in a wide variety of sectors and industries have been growing dividend payments at a faster rate than the broader Japanese market. Among these are KDDI, an integrated telecom company, electronic components maker Murata Manufacturing and Toyota.

Related Literature

Related Insights


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses or the collective investment trust's Characteristics statement, which can be obtained from a financial professional, Capital or your relationship manager, and should be read carefully before investing. 

Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. 

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.