TSI’s Scott Clayton has identified six exceptional Japanese companies whose proven dividend sustainability has earned top ratings under the country’s new political climate. As featured in our Globe and Mail exclusive, we applied our comprehensive 12-point Dividend Sustainability Rating System to spotlight stocks with the ideal combination for growth portfolios.
That means consistent and growing payouts, currency advantages, and dependable earnings from Japan’s most established exporters. These high-potential companies span Japan’s industrial landscape from automotive giants to telecommunications leaders, financial powerhouses, and diversified holding companies. Whether it’s a major auto manufacturer, a Tokyo telecommunications operator, or a diversified financial services leader, each represents marketplace strength backed by decades of dividend reliability.
Our screening process began with Japanese companies offering American Depository Receipts, then focused on exporters demonstrating the strongest fundamentals as the nation forms a new government. The election of Japan’s new Prime Minister Sanae Takaichi has driven the country’s Nikkei Stock Average to unprecedented heights as market participants anticipate the conservative-minded leader will embrace tax cuts, increase defense spending and boost government investment to spur the economy. Meanwhile, the Japanese yen has weakened on expectations that the Bank of Japan may delay further interest rate increases.
TSI’s Dividend Sustainability Rating System scores each company on critical factors: dividend history, management’s unwavering commitment to payouts, resilience in non-cyclical industries, minimal foreign currency or political risks, robust balance sheets with manageable debt, sufficient cash flow coverage, and proven earnings power over multiple market cycles. We award additional points for industry leadership positions that create competitive moats.
Excerpt from theglobeandmail.com, October 23, 2025
Sustainable dividends from Japanese stocks set to move even higher with the formation of a new government that ending months of uncertainty.
The election of Japan’s new Prime Minister Sanae Takaichi –and now the formation of her new coalition government – has spurred the country’s Nikkei Stock Average to an all-time high.
Investors feel that the conservative-minded leader of Japan’s Liberal Democratic Party – the country’s first female PM – will embrace tax cuts, increase defence spending and boost government investment to spur the economy.
Meanwhile, the Japanese yen has weakened on speculation that the Bank of Japan may delay further interest rate increases to foster growth. As our analysts at The Successful Investor point out, a weak yen tends to profit Japanese exporters while lifting their appeal with international investors.
Canadian investors have easy access to Japanese stocks through American Depository Receipts (ADRs) traded on the New York Stock Exchange. ADRs let you hold the same shares traded on the Tokyo exchange.
Here, we’re searching for profitable Japanese companies offering ADRs and with strong growth prospects given the new political/economic environment. From there, we use our TSI Dividend Sustainability Rating System to pinpoint stocks providing dependable income for investors. Note that the rating system awards points to a stock based on key factors:
- One point for five years of continuous dividend payments
- Two points for more than five
- Two points if it has raised the payment in the past five years
- One point for management’s commitment to dividends
- One point for operating in non-cyclical industries
- One point for limited exposure to foreign currency rates and freedom from political interference
- Two points for a strong balance sheet, including manageable debt and adequate cash
- Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments
- One point for an industry leader
Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.
6 dividend champions from the Land of the Rising Sun
Our TSI Dividend Sustainability Rating System generated six Japanese ADRs ready to move higher, while adding to their dividend payouts:
Toyota Motor Corp. (with a 2.9% yield) and Honda Motor Co. Ltd. (4.2%) remain Japan’s two biggest auto exporters.
Canon Inc. (3.5%) is still one of the country’s top tech manufacturers, with the low yen only bolstering international sales.
Nippon Telegraph & Telephone Corp. (3.3%) is the leading integrated telecommunications operator in Japan.
Meanwhile, the country’s largest bank, Mitsubishi UFJ Financial Group Inc. (2.8%), continues to benefit from increased lending – as well as higher fees and commissions resulting from the soaring domestic stock market.
Finally, global financial services giant Orix Corp. (3.1%) keeps profiting from its range of operations in banking, insurance, real estate and private equity.
We advise investors to do additional research on investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
