ETF investment strategy and "the bird in the hand theory"
The year-to-date percentage change of the ETF is +16.0%, which is much higher than the Nikkei Average (-1.9%) (as of June 8). In addition, the dividend yield of the ETF (cumulative 1-year results/quarterly settlement of accounts) is approximately 4.2% annually.
Despite external uncertainties, Japanese stocks are moving steadily, with the relative strength of “high-dividend stocks” (stocks with high dividend yields) being particularly notable.
The changes in the “Nikkei Average High Dividend Stock 50 Index” and the Nikkei Average are depicted in Chart 1. The High Dividend Stock 50 Index, which consists of stocks with high dividend yields, has grown stronger among the Nikkei Average stocks since December last year. According to an old Western proverb, “a bird in the hand is worth two in the bush.”
It is known as “The bird-in-hand theory” in the investment world, and it represents yield-focused investment needs.
It expresses the investment philosophy of “the two birds that are hidden in the bush (in the distance) (increased earnings) are uncertain, but investments that provide a relatively high yield income in the hands (at your feet) are reliable.”
The Japanese proverb “Today’s fifty is better than tomorrow’s one hundred” means that it is preferable to have something certain that you will receive rather than many unknowns in the future.
High-dividend stocks are classified as investment subjects that place a premium on yield. In this article, I’ll concentrate on investment strategies that use TSE-listed ETFs (Exchange Traded Funds) to make concentrated diversified investments in high-dividend stocks.
2. Focus on the high-dividend stock 50 index-linked ETF
As shown in Chart 1, the Nikkei Average 50 Index has been outperforming the Nikkei average since December last year. It indicates that stocks with relatively high dividends (yields) to investors are gaining market valuation while we cannot avoid the “variability” and “uncertainty” that symbolize the VUCA (Volatility, Uncertainty, Complexity, Ambiguity) era, such as accelerated inflation, monetary tightening, the Ukrainian crisis and concerns about recession.
Under these circumstances, the performance of the TSE-listed ETF (TSE code: 1489), which is linked to the Nikkei Average High Dividend Stock 50 Index, is strong (Chart 2).
Since the ETF is traded from one unit and the transaction price is 42,000 yen (as of June 8), it is possible to acquire a portfolio of diversified investment in Japan high-dividend stocks with slightly over 40,000 yen.
The year-to-date percentage change of the ETF is +16.0%, which is much higher than the Nikkei Average (-1.9%) (as of June 8). In addition, the dividend yield of the ETF (cumulative 1-year results/quarterly settlement of accounts) is approximately 4.2% annually.