This article is about a story on Japanese trading companies in the Nikkei Shimbun
I recently wrote a post about Sugimoto Shoji, a net-net trading company. On Saturday, there was an article about trading companies in Japan on p13 of the Nikkei Shimbun. The article basically says that Japanese trading companies’ shares are continually falling despite record income, and they now have record dividend yields, with most over 5%.
According to the paper, results are good, but the market is expecting income to fall as prices of natural resources decline throughout the world due to the anticipated Chinese slowdown. Trading companies have in recent years increase their exposure to natural resources, and they are perceived as heavily dependent on them. However, the article points out that, for example, Sumitomo Shoji has 80% of its net income from non-resource operations, and at Itochu and Marubeni it is about half, but falling, while Mitsui Bussan has 80% from resource operations. The average has fallen to around 50%.
Here are the highest large dividend yielders, with trading companies in bold:
Trading co dividend yields
And here are the top net income earners (ex-financials), with trading companies in bold:
Trading co net incomes
Basically, the market is focusing on the resource dependency, but this is not uniform, and is falling across the board. This indicates that there should be alpha in picking out the companies least exposed to such a slowdown. Further, as exemplified by Sugimoto, there are companies that do not deal with resources at all, although Sugimoto itself is dependent on Chinese GDP growth.
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