Land of the rising dividends
Japan trumps US, Europe and emerging markets on shareholder rewards
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)