TSE Cash Markets

Total dividends paid by listed companies for the fiscal year ending March 2024 are expected to reach a record high of 16 trillion yen. This is a 400 billion yen improvement from the end of September and will provide 3 trillion yen in income to households. Shareholder returns on strong performance will provide impetus for the new Nippon Individual Savings Account (NISA).

Nikkei’s survey covered 2,350 listed companies (excluding irregular accounts, etc.) with fiscal years ending in March. The annual dividend forecast as of mid-December was compared to that as of the end of September and also takes into account stock splits and reverse stock splits. For companies with undisclosed dividend forecasts, it used the average market forecast (QUICK consensus).

The total dividend, calculated by multiplying the dividend per share by the number of outstanding shares, is expected to be 15.7 trillion yen, an increase of 4% from the previous year. This is a 400 billion yen improvement from the end of September. Individuals own approximately 20% of the shares of listed companies. A simple calculation shows that 3 trillion yen will go to households. It represents about 0.5% of the gross domestic product (GDP) for the fiscal year 2022.

330 companies, or 14% of the total, raised their dividend forecasts. This is the largest number ever for this time of year. Of these, 128 companies, or 40%, have changed their forecasts from declining or remaining unchanged to increasing dividends. It is noticeable in food, where price hikes are pervasive, in automobiles, where production is recovering, and in railroads, where demand is recovering from the COVID-19 pandemic. In many cases, dividends are increased in conjunction with upward revisions to full-year earnings.

Morinaga Milk Industry raised its annual dividend from 45 yen to 50 yen after taking into account the stock split, marking the eighth consecutive year of dividend increase in real terms. Sales of well-profitable products will increase. SUBARU will add a commemorative dividend and increase its annual dividend to 96 yen (76 yen in the previous year). Profits will increase due to strong sales in the US and a lull in high raw material prices.

In the railroad sector, Hankyu Hanshin Holdings, Tokyu and Tobu Railway raised their dividend forecasts from unchanged to increased dividends from the previous year. Performance is recovering due to the return of commuter pass sales and inbound tourist (foreign visitors to Japan) demand, which had declined due to the COVID-19 pandemic.

Some companies are reviewing their dividend policies against the backdrop of investor demand for greater returns. Kikkoman changed its target for dividends to net income from 30% or more to 35%. The year-end dividend was raised from 35 yen to 59 yen (48 yen including commemorative dividend for the same period of the previous year) in line with the new policy.

Another factor is that the Tokyo Stock Exchange has requested that the (PBR) price-book value ratio be reduced to less than 1x. Generally, increasing the dividend is considered a positive factor for the stock price. Since net assets are reduced by the amount of dividend payments, this is expected to have the effect of increasing P/B ratios.

Cosmo Energy Holdings will raise its annual dividend by 50 yen from the previous estimate to 300 yen, double the previous year’s dividend. “To achieve a total payout ratio of 60%, including dividends and share buybacks, and a P/B ratio of 1x as soon as possible,” the person explains.
Aoyama Shoji also says the reason for the dividend increase is, “We took into account a comprehensive review of the company’s profit and financial condition, as well as the actions being taken to quickly correct the situation to a P/B ratio of less than 1x.”

Both net income and total dividends for listed companies for the fiscal year ending March 2024 are expected to reach record highs for the third consecutive year. The dividend payout ratio, calculated by dividing total dividends by net income, was 33%, falling short of the previous year’s 35%. Funds on hand (excluding financials, Japan Post Holdings, etc.) at the end of September were at a record high level of 101 trillion yen, and the capital adequacy ratio was 43%, the highest since the 2008 financial crisis.

Kenji Abe, chief strategist at Daiwa Securities, noted, “There is ample room to further expand shareholder returns.”