Many individual investors count on dividend payments they receive for buying shares in certain companies. But with the S&P 500 Index yielding an average of only 2.1%, it is important income investors consider global stocks to maximize their total return.
“Income-oriented investors who focus only or primarily on the United States are limiting themselves to one of the least dividend-rich stock markets,” said Rob Hordon, portfolio manager at First Eagle Investment (Trades, Portfolio) Management, in his report, “Income Opportunities in Asia.”
When it came to the best countries to find yield, Japan stood out as a special case in Asia. One of the lowest dividend payers in the world, its 2.0% average dividend yield placed it slightly below than the U.S. and far below Hong Kong at 3.2% or Singapore at 4.0%.
Unlike in Japan, Hong Kong and Singapore’s willingness to return cash to shareholders may stem from their historical ties with the United Kingdom, where investors have long expected to receive dividends, he said. Yet some Japanese corporations have started to offer more for shareholders in recent years as a trend toward shareholder friendliness grows.
“Japan seems to be moving in the direction of higher dividend payouts, driven in part by Abenomics and the pressure being applied to Japanese corporates to deliver higher returns on equity. We do have a number of dividend-paying Japanese stocks in the fund,” Hordon said.
The Tokyo Stock Exchange listed 3,495 companies as of Nov. 4. Sifting through all of them, the GuruFocus’ All-In-One Screener found three that have raised their dividends per share for a minimum of five years and are held in the portfolio of the most gurus: Toyota Motor Corp. (TSE:7203, Financial), KDDI Corp. (TSE:9433, Financial), Bridgestone Corp. (TSE:5108, Financial), Yahoo Japan (TSE:4689, Financial) and Rinnai Corp. (TSE:5947, Financial).
Toyota Motor Corp. (TSE:7203, Financial)
Toyota Motor Corp. is a carmaker founded in 1937 with three segments: automotive operations, financial service operations and all other operations.
The company has a dividend payout ratio of 28%, dividend yield of 2.84 and five-year payout ratio of 39.4%.
At the end of fiscal year 2014, Toyota paid an annual dividend of 165 yen per share, or $2.94 per ADR, up from 90 yen, or $1.85 per ADR in the prior year.
Toyota Motor Corp. also has the following five-year growth rates: 8.4% for revenue, 22.9% for EBITDA and 10.6% for book value.
Four gurus held the stock at second quarter-end: Hennessy Japan Fund (Trades, Portfolio), Causeway International Value (Trades, Portfolio) Fund, David Herro (Trades, Portfolio) and Matthews Japan Fund (Trades, Portfolio). The Signature Select Canadian Fund (Trades, Portfolio), which reports every six months in line with Canadian regulations, held the stock as of the first quarter-end.
KDDI Corp. (TSE:9433, Financial)
KDDI Corp. is a telecommunications company offering mobile and fixed-line broadband incorporated in 1984.
KDDI has a dividend yield of 2.1%, dividend payout ratio of 92% and five-year dividend growth rate of 22.8%.
For the year ended March 31, KDDI raised its dividend by 30.8% to 170 yen per share for the 13th consecutive year. It plans to pay 65 yen per share (reflecting a three-for-one stock split effective April 1, 2015), for the fiscal year ended March 31, 2016.
KDDI Corp. had a five-year annual growth rate of 10.1% for book value. Its five-year decline rates were: 14.1% for revenue, 12.3% for EBITDA and 15.6% for free cash flow.
Two gurus reported holding the stock at second quarter-end: Causeway International Value (Trades, Portfolio) and Bernard Horn (Trades, Portfolio).
Bridgestone Corp. (TSE:5108, Financial)
Bridgestone Corp. was incorporated in 1931 and operates in two segments: tires and diversified products.
Bridgestone Corp. has a dividend yield of 2.72, payout ratio of 31% and five-year growth rate of 43.7%.
In the second quarter, Bridgestone paid a dividend of 60 yen per share, up from 40 yen per share the previous year.
Bridgestone has the following five-year average annual growth rates: 7.1% for revenue, 21.7% for EBITDA and 14.8% for book value.
T. Rowe Price Japan Fund (Trades, Portfolio) held the stock as of third quarter-end, and Signature Select Canadian Fund (Trades, Portfolio) also held shares as of first quarter-end.
Yahoo Japan (TSE:4689, Financial)
Yahoo Japan is a Japan-based internet search services company incorporated in 1996.
Yahoo Japan has a dividend yield of 1.90, dividend payout ratio of 39% and five-year growth rate of 21.5%.
The company paid a dividend of 8.86 yen per share for the year ended March 31, 2015, doubling from 4.43 yen per share the previous year.
“Going forward, while continuing to invest for business growth, the Yahoo Japan Group will aim to build corporate value by providing an appropriate return of profits to shareholders,” the company said in a related release.
The five-year annual average growth rates of Yahoo Japan are: 10.5% for revenue, 7.8% for EBITDA, 3.2% for free cash flow and 18.8% for book value.
Steven Romick (Trades, Portfolio), Charles de Vaulx (Trades, Portfolio) and IVA International Fund (Trades, Portfolio) all hold Yahoo Japan in their portfolios.
Rinnai Corp. (TSE:5947, Financial)
Rinnai has a maker of products that use natural gas, such as cooking equipment and water heating equipment.
It has a dividend yield of 0.83%, dividend payout ratio of 19% and 10-year revenue growth rate of 10.7%.
The company paid 38 yen per share in the first half of fiscal 2015 and expects to increase its dividend to 40 yen per share in the first half of fiscal 2016.
The five-year annual average growth rates for Rinnai are: 5.6% for revenue, 8.7% for EBITDA and 12.9% for book value. Its free cash flow has declined at an average annual rate of 4.2% over the same period.
Two gurus held the stock at third quarter-end: T. Rowe Price Japan Fund (Trades, Portfolio) and Matthews Japan Fund (Trades, Portfolio).
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