Unlocking Dividend Growth
Japananincreasinglycompellingmarket fordividendinvestors
DavidMitchinson
A brief history recap
Whatcausedcompaniestobewaryofbanks
Japan’sweight inglobalequity markets
Collapseof equitiesbubble
Japan'sstock market’sP/E
MOFreports
NPL*sheld by21banks
Collapseof: HokkaidoTakushoku Bank,Yamaichi Securities,LTCB& NipponCreditBank
¥7.5tr Rescue package FSAreports ¥97.5trn NPLsatfinancial institutions
¥1.8tr Rescue package
How did corporate behaviour change?
The result?
Managementteamsbecamenaivetothecostofcapital….
In 2012 things started to change…
Despite these reforms, corporates still hoarded cash
The real Trojan Horse came in 2023
2023: Tokyo Stock Exchange Reforms
Managementandtheboardofdirectorsarerequiredtoproperly identifythecompany'scostofcapital andcapitalefficiency,evaluatethosestatusesandits stockpriceandmarketcapitalization, anddisclosepoliciesandspecific initiativesforimprovement andtheprogressthereofasnecessary.Especiallyfor companiesthatclearlyneedtoimprove,suchasthosewitha PBRconsistentlybelow1x.
Companiesarestartingtoreturnexcesscashtoshareholders
3 Companies Unlocking Dividend Growth
Arealink → DividendCompounder
MS&AD → Capitalde-equitisation
Kurimoto → PayoutHiker
Payout Hiker
→ Kurimotohadaveryassetrichbalancesheet
→ EngagementwithCEOYagihasseenashiftinmindset
→ 50%payout+buybacks
Pricetobooksofar… Pricetobooktarget
0.3x → 0.6x 1x Dividend ¥40 → ¥240
Dividend Compounder
Arealink
→ Japan’sleadingselfstoragecompany
→ Movingfromavolatilebusinessmodeltoaverystableone
→ 1stBuybackthisyear
→ Scopeforhigherreturns
Capital de-equitisation
MS&ADInsuranceGroup
Governmentforcedsaleof ¥4trillionequityportfolio
→ c.100%ofmarketcap!
→ Capitalwillbeusedfor organicinvestment, M&Aandforincreased shareholderreturns 8
The power of capital discipline
Changeisreal&happening StoryuniquetoJapan
Multi-yearopportunity
WSZennorJapanEquityIncomeFund
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