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Retail investors take off rose-colored glasses in assessing SoftBank's stock

TOKYO -- Despite the broader rally in the Japanese stock market, shares of SoftBank, previously considered a barometer of sentiment among small investors, remain relatively sluggish.

     The Japanese telecom giant is up a mere 4% so far this year, compared with the benchmark Nikkei Stock Average's 20% gain. It is also trailing far behind peers Nippon Telegraph and Telephone and KDDI, which have jumped 44% and 17%, respectively.

     This is blamed in part on the struggles at U.S. subsidiary Sprint and the slumping stock price of Alibaba, the Chinese e-commerce behemoth in which SoftBank holds a more than 30% stake.

     Noting that shareholder returns have become a big theme for Japanese equities, Satoru Kikuchi of SMBC Nikko Securities says "less attention is being paid to SoftBank, which gives priority to growth-oriented investment and thus does not offer generous payouts."

     Even with a record net profit for fiscal 2014, buoyed by gains from Alibaba's stock market debut, SoftBank kept its dividend at 40 yen (32 cents) a share for a fourth straight year. It is expected to stand pat this fiscal year, with its dividend yield coming to just 0.5% -- below the market average of around 1.5%.

     "We want to increase our dividend eventually, but right now our priority is [investing in] growth," President Masayoshi Son told a shareholders meeting Friday.

     SoftBank's market value topped 20 trillion yen at one point in February 2000 in the midst of the tech bubble. News stories back then often mentioned the company's paper gains. With its price-earnings ratio above 1,000, whether this number could be justified with the value of its Yahoo shareholdings and other assets was a frequently discussed topic.

     Today, investors are making a calm assessment. SoftBank's holdings of publicly traded shares had unrealized gains of 9.7 trillion yen as of Wednesday. The number comes to 8,000 yen per share, higher than its 7,518 yen closing price that day. Meanwhile, the balance sheet shows nearly 12 trillion yen in interest-bearing debt.

     "We can't incorporate the paper gains until they are realized and returned to investors in the form of dividends and the like," said a fund manager at an independent investment trust.

     SoftBank used to be considered a barometer of the mood among retail investors because the company was nearly 80% owned by them in the first half of the 2000s. The proportion has since tumbled, falling to 30% as of this past March.

     "The company is chasing growth and dreams, and patience is being tested now," says director Yasuaki Kogure at SBI Asset Management, which manages an investment trust mainly targeting SoftBank-related shares.

     The weakness of Softbank's stock, which had been underpinned by pie-in-the-sky buying, indicates that retail investors have come down to earth.

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