I wrote a piece a few weeks ago that discussed whether those looking for income might be wise to look to Japan. I’ve just received a note from asset management company Lindsell Train that backs up the point.
Back in June they listed the holdings in their Japanese Equity Fund and analysed the changed in their dividends from as far back as they have data (an average of around 20 years). The results are pretty interesting.
The average dividend has risen 5% a year and the median by 9%. That’s not bad – if a company has been growing its dividend by 9% a year for 20 years its dividend has risen five and a half times. And it is particularly not bad given that it has happened not only in an economy considered to be entirely stagnant, but one in which there has been almost zero inflation.
Michael Lindsell, who runs the fund, has also recently looked at the largest holding in the fund – Kao, which makes up around 10% of the fund’s net asset value (NAV) – and at its inflation adjusted yield since 1988. It turns out that with CPI in Japan at around 0.5% over the period, Kao’s real dividend growth has been 9.3% a year.
For comparison purposes, note that the comparable numbers for Unilever and Procter & Gamble (both considered to be solid defensive dividend payers) are 7% and 8.3%. Just one more reason not to dismiss Japanese equities as low-yielding wastes of time.