"9% Yield: An Overzealous Investor's Perspective on Japanese vs U.S. Stock Dividend Strategies [2025 Edition]"

"Japanese Stocks vs U.S. Stocks: Dividend Strategies, Differences, and My Investment Decisions"

In this article, we will explain

• What are the differences between dividend strategies for Japanese and U.S. stocks?
• Which one offers a more stable dividend income?
• How to choose a dividend strategy that suits your investment style?

By reading this article, you'll understand the differences between Japanese and U.S. stocks and gain insights on how to approach your investment strategy. Be sure to read through to the end and use this as a reference for your investment decisions!

The Difference in Dividend Stability between Japanese and U.S. Stocks

1. Features of Japanese Stocks

Japanese companies tend to increase their dividends significantly when their performance is good, but they also quickly cut dividends or even eliminate them when performance deteriorates. This means that dividends for Japanese stocks are highly sensitive to economic conditions and corporate performance. For example, during recessions such as the Lehman Brothers crisis or the COVID-19 pandemic, many companies opted for dividend cuts or suspensions.

2. Features of U.S. Stocks

On the other hand, U.S. companies prioritize maintaining stable dividends and increasing them over time. A significant number of "Dividend Aristocrats"—companies that have increased their dividends every year for decades—exist in the U.S. Some of these companies have increased dividends for over 50 years. Examples include Coca-Cola (KO) and Johnson & Johnson (JNJ). These companies prioritize maintaining or increasing dividends even during economic downturns.

The PBR (Price-to-Book Ratio) Issue and How Companies Are Responding

In the Japanese stock market, the issue of companies' PBR (Price-to-Book Ratio) falling below 1 has attracted attention. PBR is an indicator that shows how much value the stock market places on a company's assets (book value). When the PBR is below 1, it is often seen as an indication that the market values the company lower than its actual worth.

To address this, many Japanese companies, particularly large trading companies like Mitsubishi Corporation and Itochu Corporation, have been increasing shareholder returns (dividends and stock buybacks) to improve their market valuation. However, there is still a significant difference in dividend stability between Japanese and U.S. companies.

2. Challenges with Japanese Dividend Stocks

(1) Volatility of Dividend Increases and Cuts

The dividend payouts of Japanese companies are often volatile and fluctuate greatly depending on performance.

For example:

• When performance is good, companies may significantly increase dividends (e.g., trading companies).
• When performance is poor, companies may quickly reduce or even eliminate their dividends (e.g., steel and shipping companies).

For example, Sumitomo Metal Mining experienced a dividend cut during a period of poor performance, and Japan Post Shipping has faced drastic fluctuations in dividend payouts due to the volatility of the shipping industry.

This makes it harder to rely on Japanese dividends, as they are heavily impacted by economic and business conditions.

(2) Different Dividend Cultures: Japan's "Economic Conditions-Dependent" vs. U.S.'s "Stability First"

The approach to dividends differs between Japanese and U.S. companies:

• Japanese companies often prioritize internal reserves (savings) over dividend payouts, and there is less of a stigma attached to cutting dividends. When performance declines, companies are quick to reduce dividends.
• Example: Hitachi chose to reinvest profits in research and development rather than increasing dividends, even with strong profits.
• U.S. companies view maintaining stable dividends as paramount. A reduction in dividends is considered a significant failure, and many U.S. companies strive to avoid this at all costs. Consequently, there are many "Dividend Kings" and "Dividend Aristocrats" that have continued to increase dividends for decades, regardless of economic conditions.

3. Stability of U.S. Dividend Stocks

(1) Long-Term Culture of Increasing Dividends

U.S. companies place high importance on paying stable dividends. Particularly, "Dividend Kings" and "Dividend Aristocrats" have maintained consistent dividend increases for over 25 years.

Examples of Dividend Kings (50+ years of increasing dividends):

• Procter & Gamble (PG): 67 years of consecutive dividend increases.
• Johnson & Johnson (JNJ): 61 years.
• Coca-Cola (KO): 60 years.

These companies belong to sectors like consumer goods and healthcare, which are less impacted by economic fluctuations. This stability allows them to maintain or increase dividends even during economic downturns.

(2) Avoiding Dividend Cuts at All Costs

In the U.S., reducing dividends is seen as a major management failure. As a result, U.S. companies go to great lengths to avoid cutting dividends, even during recessions.

Examples of companies that continued to increase dividends during the 2008 financial crisis:

• McDonald's (MCD)
• Johnson & Johnson (JNJ)
• Procter & Gamble (PG)

By contrast, many Japanese companies quickly reduce dividends when performance worsens.

(3) High Dividend Investment Strategy in the U.S.

If you want to focus on high dividends, a good strategy is to invest in "high dividend" U.S. stocks that also focus on consistent dividend growth.

Examples of high dividend U.S. stocks:

• Johnson & Johnson (JNJ): 2.9% yield, 61 years of consecutive increases.
• Coca-Cola (KO): 3.1% yield, 60 years of increases.
• PepsiCo (PEP): 2.8% yield, 51 years of increases.

Alternatively, if you're more interested in diversification, you could look into high-dividend ETFs.

4. Conclusion: My Investment Strategy

In conclusion, I believe U.S. stocks are more stable in terms of dividends and are less susceptible to cuts during downturns. For those looking for reliable income streams and long-term growth, focusing on "Dividend Kings" or "Dividend Aristocrats" is a prudent strategy.

As for Japanese stocks, while there are stable dividend payers like KDDI, NTT, and Kao, they are limited in number and still subject to the broader economic and business fluctuations.

For my own portfolio, I focus more on individual stocks with high dividends rather than ETFs. I prioritize finding high yield investments even at the cost of taking on more risk.

Ultimately, choose a strategy that suits your investment style, whether you're seeking stability or are comfortable with more risk for higher returns.