Land of the ris­ing div­i­dends

Ja­pan trumps US, Europe and emerg­ing mar­kets on share­holder re­wards

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Some of the world’s best div­i­dend op­por­tu­ni­ties can be found in a sur­pris­ing place. While in­vestors might pre­sume Sil­i­con Val­ley’s tech hub, Lon­don’s fi­nan­cial cen­tre or ex­cit­ing emerg­ing mar­kets might pro­vide top pay­out op­tions, one of the win­ners is that old elec­tron­ics in­dus­trial work­horse Ja­pan, ac­cord­ing to re­search by in­vest­ment bank UBS.

The study finds that Ja­panese com­pa­nies rank highly for div­i­dend growth, safety and value when com­pared to other global re­gions. The data shows av­er­age div­i­dend growth among Ja­pan’s equities is run­ning at 12.4%, more than twice the pace of emerg­ing mar­kets or the Asia ex-Ja­pan area, with US (6.1% av­er­age) and Europe (6.9%) also trail­ing.

In­ter­est­ingly, Ja­pan also ranks top when it comes to in­come se­cu­rity. The like­li­hood of de­clines in Ja­panese cor­po­rate pay­outs runs at 7% ver­sus the 7.2% risk of a div­i­dend cut to US equities. The fig­ure stands at 10.3% in Europe.

Yet this high growth and low risk com­bi­na­tion has not re­sulted in ex­pen­sive val­u­a­tions for Ja­pan’s div­i­dend equities, ac­cord­ing to the UBS study.

‘There are three re­gions where yield ap­pears cheap,’ the re­search states, go­ing on to name ‘emerg­ing mar­kets, Ja­pan and Europe.’

Three of the best per­form­ing Ja­pan fo­cused funds this year in­clude First State Ja­pan Fo­cus Fund (GB00BWNGX432), Fidelity In­sti­tu­tional Ja­pan (GB0003371399) and Bail­lie Gif­ford Ja­panese (GB0006011133), ac­cord­ing to per­for­mance data from Morn­ingstar. (SF)

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