TOKYO -- Shares with lofty dividend yields have navigated this year's market turbulence relatively well, but now some of them are trending downward as investors pay closer attention to earnings prospects.
Those that enjoy stable earnings and continue to increase dividends -- such as telecom stocks -- defied the downward pressure on the market Thursday. On the other hand, resource and banking shares slid notably, despite their generous dividends.
For companies that close their books in March, Monday is the last trading day to qualify for shareholder perks such as dividends for fiscal 2015. Around this time of the year, retail investors typically step up buying to gain eligibility for shareholder rewards.
On Thursday, the Nikkei Stock Average fell 108 points, or 0.64%, to 16,892. Yet some high-dividend stocks climbed. Wireless carrier NTT Docomo, which projects a dividend yield of 2.65% for fiscal 2015, rose 1%. Watchmaker Citizen Holdings, with a projected yield of 2.66%, gained 0.5%. Japan Airlines, whose airfare discount coupons are a popular shareholder reward, rose 2%.
Investor interest is particularly strong in companies that continue to increase dividend payouts, such as Docomo. A Nomura Securities index tracking 58 companies that have raised dividends for six straight years or longer rose 0.3% to 17,259 on Thursday. The index, which has fallen nearly 4% since the start of the year, is resisting further declines even as the Nikkei average has tumbled by double digits over the same period.
"Continued dividend increases are a sign that earnings will keep growing and give a sense of assurance," says Sayuri Otsuka at Nomura.
Meanwhile, companies in the resource business, including trading houses and oil distributors, saw their shares drop Thursday. Mitsui & Co., which said Wednesday it likely will sustain its first ever group net loss, tumbled 7.5%. JX Holdings, which expects to book a 330 billion yen ($2.93 billion) net loss this fiscal year, also fell, sliding as much as 3.7%.
Banks, which are likely to be hit hard by the Bank of Japan's negative interest rate policy, also declined. Shares of Mitsubishi UFJ Financial Group, whose dividend yield is over 3%, dropped 3.28% Thursday.
Companies whose risk of falling outweighs the benefit of their high dividend yield are failing to attract much investment, says Yoshinori Ogawa, senior strategist at Okasan Securities.
In the current climate of economic uncertainty, stocks with high dividend yields have been pursued in the U.S. market, too. The S&P 500 Dividend Aristocrats index, which consists of companies that have increased payouts for 25 straight years, climbed to a record 384.25 on March 18.