Japanese Listed Companies Increasing Dividends, 900 Firms Annually... Amounts Also at Record High

Japanese listed companies are consecutively expanding their dividends. With as many as 900 companies deciding to increase dividends over the course of a year, the total annual dividend amount is also expected to set a record high for the fourth consecutive year.

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On the 20th, Nihon Keizai Shimbun (Nikkei) conducted a survey targeting about 2,200 listed companies whose fiscal year ends in March next year, confirming that approximately 900 companies, accounting for 40% of the total, are planning to expand dividends.

The total dividend amount of these companies is estimated to reach about 18 trillion yen (approximately 157.32 trillion won), an 8% increase compared to the previous year. In this case, it will break the record for the fourth consecutive year. Compared to the period before the COVID-19 pandemic, this figure represents a 50% increase. The proportion of companies planning to expand dividends among all listed companies also rose by 7 percentage points.

This dividend expansion is expected to act as a positive factor for individual investors in building assets. Nikkei reported that considering individual investors hold about 20% of listed company stocks, simply calculating on a pre-tax basis, about 3.6 trillion yen will flow into household income. Hideo Kumano, Chief Economist at Dai-ichi Life Research Institute, evaluated, "The dividend amount of about 18 trillion yen corresponds to an increase of about 500 billion yen in real consumption or 0.1% growth in real Gross Domestic Product (GDP)." He added, "Dividend income is generally perceived as an increase in income, so there may be a consumption stimulus effect, especially among the elderly."

The rush of Japanese companies to expand dividends is a result of recent increased demands from the Tokyo Stock Exchange and investors for improved capital efficiency. With retained earnings accumulating thanks to recent strong performance, demands for shareholder returns are growing stronger. As of the 2023 fiscal year, the equity ratio of listed companies excluding finance stood at 42%, the highest level ever recorded.

What is particularly noteworthy is that 230 companies have decided to expand dividends despite forecasts of a decrease in annual net profit. Traditionally, Japan has had a strong tendency to link dividends with profits. However, the newspaper pointed out that as each company's financial base stabilizes, it has become easier to raise dividends regardless of performance.

Mitsui & Co. expects its consolidated net profit for the 2024 fiscal year to decrease by 15% compared to the previous year, but plans to increase the annual dividend from 30 yen to 200 yen. Kenichi Hori, President of Mitsui & Co., explained, "We will allocate funds to both growth investment and shareholder returns to enhance both." Morinaga Milk Industry also plans to expand shareholder returns including dividends along with a 10 billion yen share buyback. In addition, Toyo Theatre and Alps Alpine have decided to increase dividends despite having a price-to-book ratio (PBR) below 1, and Sumitomo Corporation plans to introduce a progressive dividend system that guarantees a minimum dividend.

Nikkei reported that although Japanese companies’ dividend payout ratios were lower than those of Western companies in the past, this is no longer the case. The average dividend payout ratio for the 2024 fiscal year is expected to rise by 3 percentage points from the previous year to 36%, a level comparable to the U.S. S&P 500 index (34%). During the same period, the total net profit of listed companies is expected to decrease by 2% compared to the previous year, marking the first decline in five years.

This content was produced with the assistance of AI translation services.