However, other global income managers suggest there are not as many opportunities as you might think.
Ben Lofthouse, manager of the Henderson International Income Trust
“Dividend growth in Japan is strong but it is coming from a low base. The payout ratio is low – somewhere in the 20 [per cent range] – whereas the UK is closer to a 50 per cent ratio. It is a tricky one, we are certainly seeing a lot more stocks yielding attractively. The problem is that some of those with high yields are in areas of the market that have been structurally challenged. The range of higher-yielding stocks in Japan is not across as broad a base as in other markets, so the number of opportunities you can look at are probably lower there than [elsewhere].”
Jacob de Tusch-Lec, manager of the Artemis Global Income and Global Equity Income funds
“I’m drawn to Japan from a micro point of view, but I’m slightly underweight [the country]. It only pays about 5 per cent of global dividends, so you have to go very overweight for it to make a meaningful difference. The problem is the micro reform we’re seeing is good, but it [tends to] apply more to stocks that have very low dividends to begin with. Companies with high dividends have already done that. Japan is somewhat cheap and is doing something to transform itself, although it’s going slowly.”
James Harries, manager of the Newton Global Equity Income fund
“There are arguments to suggest that corporate governance in Japan is changing so that shareholder returns are being given a greater emphasis, but I’m sceptical about it. There are individual examples where that is the case, and some companies are putting up their dividends quite substantially, such as Japan Tobacco. We are struggling to find businesses [in the country] in which to invest. We are underweight Japan, but we have hedged into the yen as we recognise how cheap [the currency] is.”
Stephen Thornber, manager of the Threadneedle Global Equity income fund
“We like the Japanese recovery and we think [prime minister Shinzo] Abe’s policy is moving the right way, but it is not going to be able to cure all ills at the same time. [There are] fewer opportunities but quite often those are international in nature, such as Canon. We like Japan and the dividend culture is beginning to change, but from such a low level it will be quite a while before meaningful yields come through.”
