Japan Dividend List
Dividends Going East!
In this post, we shall explore dividend stocks in a brand new market, Japan!
Thanks to poems, we have the ability to screen US, UK, Hong Kong, Singapore, Malaysia and Japan! Japanese stocks have never been interesting since they paid little dividends, had lower ROEs and lower margins. But things seemed to be changing with the Nikkei breaking its 1989 high this year.
Let's look at the list:
The names above show the blue chips of Japan and companies we have heard of. NTT, Bridgestone, Komatsu. Today, some of these names trade at 3-4% dividend, at single digit to low teens PE and some below book value while Nikkei rises above all time high. It seemed we might be able to find some bargains. The criteria for the screening is as shown below:
As per past screens, we simply used ROE of 10%, operating margins of 8% and dividend at 3% which churned out the interesting list of names. While there are many interesting names, I would highlight the following two: Bridgestone and Tecmo Koei.
Bridgestone
This is the world's largest tire company trading at 1x Price-to-Book while giving a 3.6% dividend yield. The stock has always traded cheaply as there isn't much growth in the auto industry and tires being tires, are just not sexy enough. Listed in Japan, it is also associated with the Japanese auto industry which is being disrupted by electric vehicle. Toyota led Japan into the hybrid and hydrogen solution for cars only to be upended by Elon Musk and then China.
Today, the whole Japan auto industry is playing catch-up in EV. It is tough.
Nevertheless, unless cars can fly, they need tires and Bridgestone will continue to grow as long as we buy cars. Management simply needs to buck up and drive the company to grow or perhaps consolidate the Japanese tire industry with still at least four tiremakers fighting each other in Japan much like the shoguns back in history.
Interestingly, shoguns make good segue into the next name.
Tecmo Koei
This is a Japanese gaming company famous for its brainless slash and cut games based in Chinese and Japanese history. One of its biggest hit is about Japan’s shogun Oda Nobunaga, the shogun who catalyzed the unification of Japan during the Sengoku era back in 15th century.
Tecmo Koei has carved out a 40 year niche in this gaming segment. Some of us might remember playing the classic Three Kingdom strategy game back in the 1980s. Gaming is a highly profitable and highly cashflow generative business and Tecmo Koei has simply compounded growth as such.
Today it is trading slightly cheaper against its peers as the company has not been able to create more hit titles. The founding family also still owns a big chunk of the company and therefore restricts trading volume. But at teens PE and 6-7% FCF, it does feel cheap.
That said, we have not studied the above Japanese names in detail. These names are also not in the portfolio. So do do more research and always remember caveat emptor!
Huat Ah!
Main blog:
http://8percentpa.blogspot.com/
This post does not constitute investment advice and should not be deemed to be an offer to buy or sell or a solicitation of an offer to buy or sell any securities or other financial instruments.