ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintTitle ChevronIcon Twitter
Stocks

Investors snap up cash-rich Japanese stocks

Hunt is on for dividends, buybacks as books close

TOKYO -- Cash-rich companies shone bright in Tokyo on an otherwise lackluster Tuesday, pulling in investors hoping for payouts or share buybacks as the fiscal year draws to a close.

The Nikkei Stock Average dipped 0.12% Tuesday. But cosmetics maker Ci:z Holdings, which raised its year-end dividend forecast the day earlier, climbed more than 8%. Machine tools maker Tsugami gained as much as 6% at one point, having announced a share repurchase plan.

To qualify for year-end dividends as companies close their books March 31, investors must purchase shares by March 28. Businesses known to be proactive about rewarding shareholders are thus likely to attract buyers this week.

Companies with large stores of cash on hand are in a position to return much of that to shareholders, and tend to have relatively high stock prices. Industrial robot maker Fanuc's net cash -- cash, deposits and securities minus interest-bearing debt -- stands around 777 billion yen ($6.77 billion), according to Citigroup Global Markets Japan. This is roughly 60% of the company's total net assets.

Fanuc has climbed 13% since the end of 2016, as has Keyence, a sensor maker whose cash on hand totals nearly 70% of net assets. SMC has gained 19% over the same period. The Nikkei index has risen less than 3%.

Cash-flush companies also tend to boast solid earnings, fueled by distinctive technology and product offerings. "Income from core operations is sufficient to cover capital investment, giving [companies] leeway to put cash on hand toward shareholder returns," said Keita Kubota, an investment manager at Aberdeen Asset Management.

Foreign investors often hold outsize stakes in these companies. At video game maker Nintendo, 48% of shares are held by foreigners. That figure verges on 60% at optical products maker Hoya. Pension funds and foundations in the U.S. and Europe frequently are prepared to hold these shares for decades at a time, and are not shy about calling out companies they see delivering insufficient returns.

"Pressure from investors for greater returns could mount ahead of shareholder meetings" in June, said Naoki Iizuka, chief strategist at Citigroup in Japan.

In total, Japan's nonfinancial companies held a record 375 trillion yen in internal reserves at the end of 2016, according to the Ministry of Finance's October-December survey of corporate balance sheets. Cash and deposits came to 185 trillion yen. For companies to put these excess funds to work could be just what Japan's stock market needs to further recent gains.

(Nikkei)

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more