The strategy’s focus is not solely on the current level of dividend yield but also on dividend growth potential. The strategy aims to deliver stable total returns from both income and capital gains.
Dividends serve as indicators that encapsulate company fundamentals such as earnings potential, financial strength, and management strategy. Dividend yield is therefore an effective factor for long term investment. The strategy’s focus is not solely on the current level of dividend yield but also on dividend growth potential.
Through bottom-up research, the investment team evaluates a company's competitiveness, cash generation potential and business strategy. The strategy aims to deliver stable total returns from both income and capital gains.
The strategy invests in competitive companies paying high dividends. Competitive companies have cash generating ability - the question is how the cash is utilized. Superior management teams balance investments and shareholder returns to create a virtuous cycle of cash flow generation.
When assessing a stock’s dividend growth potential, the focus is on a company’s ability to generate cash, the source of dividend payouts. Some key attributes the investment team looks for are a strong business model, efficient management, and sound financial conditions. A strong emphasis is placed on direct contact with company management. Through interactions with the senior management, the investment team seeks to determine the company’s competitive edge, generation and uses of cash, and stance towards shareholder returns.
The strategy invests in competitive companies paying high dividends. Competitive companies have cash generating ability - the question is how the cash is utilized. Superior management teams balance investments and shareholder returns to create a virtuous cycle of cash flow generation.
When assessing a stock’s dividend growth potential, the focus is on a company’s ability to generate cash, the source of dividend payouts. Some key attributes the investment team looks for are a strong business model, efficient management, and sound financial conditions. A strong emphasis is placed on direct contact with company management. Through interactions with the senior management, the investment team seeks to determine the company’s competitive edge, generation and uses of cash, and stance towards shareholder returns.
Focus on Dividend Growth Potential & Yield
Identify Competitive Firms With Cash Generation Ability
Experienced Investment Team & Robust Research Platform
Concentrated Portfolio of Approx. 50 Stocks
The investment universe is put through a dividend yield screen, based on the 12-month forward dividend yield. The universe is narrowed down to stocks with above-average dividend yield. This step typically narrows the range to 400 – 500 stocks.
High market share
High value added goods & services
High Capital Expenditure (CAPEX) efficiency
Efficient use of working capital
Low financial leverage
High levels of cash reserves
Approximately 50 stocks
High dividend
High quality bias e.g. high Return on Equity (ROE), low leverage
Low valuation bias e.g. low Price to Earnings Ratio (PER)
No bias towards low growth or utility stocks (despite common perception that high dividend portfolios have large exposure to such names)
Low beta and volatility
Portfolio Manager
Toshinori Kobayashi has served as team leader and portfolio manager of the Research Active Management team since 2010.
He began his career at Nikko Securities Investment Trust & Management (a predecessor of Nikko AM) in 1988 as a research analyst. He became a portfolio manager in 1992 and was subsequently promoted to team leader of the Market-Oriented Portfolio Management Team in 2003. He holds a B.A. in Law from Chuo University and is a Chartered Member of the Security Analysts Association of Japan (CMA).
To generate new growth, companies today must have a strong approach to ESG. By investing in the stocks of such companies, we believe that excess returns can be achieved over the medium to long term. The Japan Equity team aims to generate alpha by selecting companies with superior ESG practices through a stock selection process that combines both negative and positive screening, and an optimisation process that incorporates thorough risk management.
When we conduct a historical comparison between leading ESG indices and the TOPIX (Tokyo Stock Price Index), it is apparent that ESG indices do not always outperform the market. This implies that investing in companies with superior ESG ratings on its own is insufficient for outperformance. Instead, a well-conceived approach is necessary when implementing ESG considerations. As with any investment, appropriate stock selection and portfolio management are crucial to improve performance and control risk within an ESG strategy.
Pursue alpha through a combination of financial and non-financial information, including ESG factors
Focus on ESG factors that lead to future earnings and strengthen competitiveness
Involve consistent engagement with corporate management teams
All active Japan equity investment strategies incorporate Creating Shared Value (CSV) evaluations, which take ESG factors into consideration. It is a comprehensive score that was developed by applying the CSV theory proposed by Professor Michael Porter of Harvard University. The score assesses how companies balance their engagement of ESG issues with the pursuit of profitability and competitiveness, in order to create value for both society and shareholders. Our analyst research has incorporated CSV evaluations since 2013.
Firms that have been involved in criminal conduct, fraud, and/or accounting fraud, or that have caused environmental or social problems, are classified as having governance risk. The Japan Equity team excludes firms with perceptible corporate governance risk from its investment universe, while also seeking to promote better governance by engaging with the firms it invests in.
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Past performance or any prediction, projection or forecast is not indicative of future performance. The Funds or any underlying funds may use or invest in financial derivative instruments. The value of units and income from them may fall or rise. Investments in the Funds are subject to investment risks, including the possible loss of principal amount invested. You should read the relevant prospectus (including the risk warnings) and product highlights sheet of the Funds, which are available and may be obtained from appointed distributors of Nikko AM Asia or our website (www.nikkoam.com.sg) before deciding whether to invest in the Funds.
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