After years of ranking among the stingiest developed market companies, cash-rich Japanese companies are starting to part with some of that cash via increased dividends and share buybacks.
A new wave of exchange traded funds is helping investors profit from the theme of increased shareholder rewards from Japanese companies, including the WisdomTree Japan Dividend Growth Fund (NYSEArca: JDG), which debuted today.
The WisdomTree Japan Dividend Growth Fund is the tenth Japan-specific fund from WisdomTree, the fifth-largest U.S. ETF issuer, and joins such luminaries as the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) in the issuer’s Japan lineup. [More Upside Ahead for Japan ETFs]
JDG tracks the WisdomTree Japan Dividend Growth Index (WTJDG), which is a fundamentally weighted index employing multiple investment factors.
“The growth factor ranking is based on long-term earnings growth expectations, the quality factor ranking is based on three year historical averages for return on equity and return on assets, and the valuation factor is based on the earnings yield. Companies are weighted in the Index based on annual cash dividends paid,” according to WisdomTree.
The new ETF is home to nearly 220 stocks, only two of which command weights north of 5% and only three others garner allocations of 4% or more. The consumer discretionary, also home to some of Japan’s most voracious share repurchasers, is JDG’s largest sector weight at almost 20%. Industrials are next at 19.7% followed by telecom and technology at 14.9% and 14.6%, respectively.
“WisdomTree believes Japan has the potential to be one of the better performing countries within the developed world over the coming years. This optimism stems from a fundamental perspective—the markets still have reasonable valuation ratios despite strong gains over the last few years. But it also has the support of an accommodative central bank that is very coordinated with government actions to reinvigorate Japan,” said WisdomTree Research Director Jeremy Schwartz in a note out Thursday.